Gold Forecast: October's 'Mini-Crash' Potential And Gold Price Update

Sunday, September 29, 2019

gold analysis

The gold market saw the bearish pattern of an early-week high into resistance last week, with the index hitting a peak of 1543.30, made on a Tuesday time top. From there, lower prices were seen into late-week, here dropping down to a Friday bottom of 1493.30 - before bouncing slightly off the same to end the week. From the comments made in past articles, the 72-day cycle has been pointing down since the late-August/early-September timeframe, with the next low of significance expected to come from this wave.

Heading into the month of October, there is the potential for a 'mini-crash' in stocks, which we will go into in a bit. Before that, we will take a look again at the Gold market, which should be nearing a bottom of some importance.

Gold Cycle Update

As pointed out last weekend, the most recent short-term rally for gold was likely an Elliott 'B' wave - and with that was expected to end up as a countertrend affair, holding below the swing top registered back in early-September. Here is the action, shown with our 34-day cycle:

We can see on the above chart our Elliott 'B' wave labeling - with a wave 'C' now deemed to be in force, a move which is expected to bottom the larger 72-day time cycle. In terms of price, as mentioned many times in prior articles, the 72-day moving average was seen as the magnet to the current decline phase of this 72-day wave, though there is always the potential for additional weakness through the same.

Having said the above, in terms of patterns, the overall assumption has been that the correction phase of the 72-day wave would end up as an eventual countertrend move, holding at or well above the early-May bottom - the prior low for this cycle.

Going further, since at or into the window for our 72-day cycle bottom to materialize, we need to be aware of key price levels for confirmation. For now, it is too early to confirm an upside ‘reversal point’ for this component, though any push above the 1566.20 figure going forward, if seen, would certainly tell us that it has turned higher. With that, our first upside reversal level should materialize in the coming days, with the latest numbers always posted in our thrice-weekly Gold Wave Trader market report.

Gold's Biggest Technical Problem

As mentioned above, gold is coming due for a 72-day cycle bottom, and with that should make a move back to or above the early-September peak in the coming weeks/months - with the next upward phase of this 72-day wave. Having said that, there is a problem for the mid-term picture, which comes from the position of the commercial hedgers. Take a look at the next chart:

With the action seen last week, the commercial hedgers have added in another 27,000 contracts (approximately) to the short side, which brings their current net short total up to some -345,145 contracts - with the data current to the 9/24/19 close.

From the comments made in recent articles, the net shorting from the hedgers was viewed as a bearish indication for the price of gold - and with that supported the idea of a correction playing out with the 72-day cycle into early-Autumn, which we are now into. More telling to the current market is that the hedgers are continuing to add to that position - and are now net short their largest amount in many years. In other words, they are now more net short than they were at the July, 2016 price top - which ended up as a semi-major peak for gold, prior to a waterfall decline of nearly 270 points from peak-to-trough in the following months.

Having said the above, the cycles are in a slightly different configuration than they were at the July, 2016 peak for gold. Going further, the commercials are 'scale' traders, and will gradually move in and out of positions as the market is rising (or falling).

For the mid-term picture, even though the probabilities do favor the next upward phase of the 72-day cycle taking gold back to higher highs for the larger swing, the configuration of the commercial hedgers says that this rally will be on shaky ground, and will likely be limited. What follows that rally should be the next major decline in gold prices, which we expect to mark a better buying opportunity.

U.S. Stocks and 'Mini-Crash' Potential

From the comments made in past articles, the last semi-important bottom was made with the 45 and 90-day cycles, doing so back in the month of August with the tag of the 2822.12 SPX CASH figure. From there, the combination of these waves were pointing higher, with our key date (noted in our reports) being September 19th - which was favored to mark a peak with our 45-day time cycle, shown below:

With the above said and noted, the downward phase of the 45-day cycle was recently confirmed to be in force, with the next bottom of significance expected to come from the same. In terms of price, our minimum expectation with this wave called for a drop back to the 35-day moving average, which Friday's action has basically satisfied. In terms of time, we have identified the next key date for a bottom with this component, with the precise details noted in the daily version of our Market Turns report.

Going further with the above, the month of October is notorious for market crashes, where the market drops a very large amount - in a short time span. With the current cyclic configuration for U.S. stocks, we do see the potential for a 'mini' panic in the coming weeks. If this should play out, then we have a key timeframe of focus for the next important low to form.

U.S. Stocks, Bigger Picture

Even with the bearish comments above (don't get too scared folks), the bigger picture for stocks remains rosy. That is, the larger bull market is still seen as being in force, and with that we view any correction in the days/weeks ahead as a buying opportunity, in the anticipation of higher highs to follow.

There are many technical indications that we would expect to see at a major market top for stocks, and none of these have yet to materialize. However, the fundamental picture is starting to move to a more bearish/cautious configuration, and with that we will want to watch the technical position very closely in the coming months - as we do expect a major peak to follow.

For the even-bigger outlook for U.S. stocks, we are expecting an economic recession in the coming years, one which is normally accompanied by an average price decline of 34% in the S&P 500 index - with the last two such declines being 49 and 51%, respectively. Even said, that decline should end up as an eventual countertrend affair, against the February, 2016 low of 1810.10 on the SPX, though it promises to be a very scary affair for anyone caught holding the long side. Stay tuned.

Jim Curry

The Gold Wave Trader


Gold-Eagle provides regular commentary and analysis of gold, precious metals and the economy. Be the first to be informed by signing up for our free email newsletter.

Free Gold-Eagle Newsletter!

  • Fresh weekly insights on gold, precious metals, and the economy
  • Leading authors from around the world
  • Always free
  • Stay informed!


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.