Gold Market Current Outlook

Monday, July 30, 2018

fine gold

Gold's Short-Term Cycles

Heading into the new week, it looks like the 10 and 20-day cycles for gold may have already peaked with the recent swing high; if they did, then they did it without so without our customary tag of the 20-day moving average (chart, below). Taking out the 1220.30 figure (December, 2018 contract) to the downside in the days ahead - if seen - would infer the next 10 and 20-day cycle downward phase to be back in force, while remaining above the same and a tag of the 20-day moving average or higher could still materialize.

As for the larger 34-day wave (chart, below), due to the configuration of our detrend and momentum indicators, any new price low - if seen at any point going forward - would be strongly favored to trough this component, for what should be a normal rally which takes prices back to the 34-day moving average or higher.

Gold’s Mid-Term Cycles

Stepping back, the next mid-term rally phase is still expected to come from the larger 72-day, 20-week and 154-day cycles - the combination of which are well into extended range for a bottom. Having said that, the next upward phase of these waves can't really be confirmed until a reversal back above the 1277.00 figure (December, 2018 contract) is seen, a number which should continue to drop going forward - depending on the price and technical action seen in-between.

Stepping back further, the low seen with the smaller 72-day, 20-week and 154-day waves should also end up as the bottom for the even-larger 310-day component (chart, below), which - like the waves below it - is into extended territory for a low. Once this trough is set in place with these mid-term cycles, the bare-minimum rally should be 8% off the bottom - though there is the potential for a rally of 16-19% or more, due to the average price statistics in regards to the larger 154 and 310-day cycles. In terms of time, the next rally phase of these waves should last at least 5 weeks, though the average rallies have taken 8 weeks or more before completing.

Gold Seasonals

The chart below again shows the average seasonal pattern for the gold market. Inside this pattern, gold shows a bottom for the mid-August timeframe, plus or minus, where the pattern turns stronger into late-year - and which normally extends into the first few months of the following year. With that, new lows seen into mid-August (plus or minus) should be watched closely in regards to technical action, based upon the configuration of the mid-term cycles.

Commercial Headers

In looking at the COT numbers from last week, of note is that the commercial hedgers (chart, below) have covered some 8,000 shorts, which drops their current net short total down to 65,688 contracts - with the data current to last Tuesday's close. That action now puts the hedgers holding their smallest net short total in over two years - and is something that I see as being a bullish indication going forward - even though our mid-term trough has yet to be confirmed in place.

Gold Timing Index

Even with the commercial hedger positioning seen as supportive of a mid-term rally, there is no guarantee that lower lows won't play out first. More importantly, we are waiting to see if a new mid-term buy signal from our Gold Timing Index (chart, below) is seen in the days/weeks ahead, as buy/sell signals with this indicator have normally occurred at or near tops and bottoms with the 310-day time cycle.

Of note is that a divergence between the Gold Timing Index and price is the initial setup for a mid-term buy - though the actual signal does not come until the indicator itself is able to close above its upper standard-deviation band, which it has yet to do. Also, there is no guarantee that the current divergence will remain intact in the days ahead, but is something that we will be watching with great interest in our thrice-weekly Gold Wave Trader report.

The Bottom Line

The overall bottom line is that gold is still in a mid-term bottoming process, one which may or may not be complete. Once finished, however, the overall assumption is that a rally in the range of 8-19% will be seen on the next mid-term upward phase, one that is expected to last 5-8 weeks or more - before forming another mid-term peak and decline phase. Until a lower level materializes, it would currently take a reversal back above the 1277.00 figure (December, 2018 contract) to confirm this upward phase to be back in force, a number which should continue to drop going forward, depending on the action. Stay tuned.

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.