Gold Forecast: Gold Mid-Term Cycles Moving Into Bottoming Range

Sunday, May 19, 2019

fine gold

Gold saw its high for last week registered in Tuesday's session, here doing so with the tag of the 1304.20 figure (June, 2019 contract). From there, a sharp decline was seen into late-week, with gold prices dropping all the way down to a Friday low of 1274.60 - also managing to end the week at or within earshot of the same.

As per the title to this article, the cycles predicted the decline we have seen in recent months. Back in February I warned that "Gold cycles are topping!" - with the metal trading at the 1350's at the time. I also pointed out that a better entry would come into late-Spring, only after a mid-term decline had played itself out.

The Overall View for Gold Prices

From the comments made in my prior article, a short-term upward phase was deemed to be in force with the 34-day time cycle, with that analysis looking for a push up to the 1299-1306 region for the June contract - which was the 50-61% retracement zone of the prior swing down. Here is our 34-day cycle once again:

Note that the last peak came right into the 1299-1306 region, and has turned sharply lower off the same into late last week. Whether that level will end up as the high for this 34-day wave remains to be seen, however.

In terms of patterns, due to the configuration of the larger 154-day cycle - with the channel tracking this wave still pointing down - the probabilities did favor the upward phase of the 34-day wave to end up as a countertrend affair. If correct, a drop back to or below the lows would be expected to play out into the late-May or early-June timeframe, where a bottom with the larger (154-day) wave should try and form. Here again is our 154-day cycle:

With the above said and noted, any push below the 1274.00 figure (for the June contract) in the coming days - if seen - would likely usher in a push back to or below the 1267.30 swing low, which would signal the 34-day cycle's downward phase to be back in force. If that should materialize, that would mean that the final drop down into our larger 154-day trough is in progress, which would then have us on the lookout for the next mid-term price low.

For the bigger picture, until a lower level materializes, it would currently take a reversal back above the 1331.00 figure (June, 2019 contract) to confirm the next upward phase of the 154-day wave to be back in force. The good news is that this ‘reversal point’ should start to drop in the days/weeks ahead, though for now it remains locked in place.

Stepping back further, if and when our 154-day cycle does bottom out, then the probabilities will favor a decent rally playing out into what is looking to be the July - August timeframe, with the decent potential for that rally to take out the February, 2019 peak (i.e., 1356.20). A mid-Summer peak should give way to another decline into late-Summer or very early-Autumn.

Gold Market Sentiment

In looking at gold sentiment again this weekend, the commercial hedgers (chart, above) continue to get more bearish, having added in a whopping 40,000 contracts (approximately) to the short side, which brings their current net short total up to 137,183 contracts - with the data current to the 5/14/19 close.

With the above said and noted, the position of the hedgers can only be interpreted as bearish - at least until otherwise reversed. Going further, their action supports the analysis for lower lows to come before bottoming our 154-day time cycle. How much lower is speculation, though the next key level comes in at the 1250-1251 level, which is the 61% retracement of the prior upward phase of this cycle, from the August, 2018 bottom to its February, 2019 peak.

The Bottom Line for Gold Prices

The overall bottom line remains as it has in past months, in that the next mid-term bottom for gold prices should come from the 154-day cycle, with a particular focus on the late-May or early-June timeframe to trough the same. From there, a decent percentage rally is expected to play out into the summer months, before giving way to another low around the late-Summer to early-Autumn period. More on all as we continue to move forward.

Jim Curry

The Gold Wave Trader


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Jim Curry is the editor and publisher of The Gold Wave Trader and Market Turns advisories - each of which specializes in the use of cyclic and statistical analysis to time the Gold and U.S. stock markets. He is also the author of several trading-related e-books, and can be reached at the URL above.