Gold Price Forecast: Cycle Low Next Week And The 2018 Breakout

Gold has outperformed silver and miners for over a year. We should see a change in leadership this year. Precious metals deliver their best gains when miners or silver pave the way.

Miners sustained significant technical damage last week closing below the January 9th pivot low, caution is advised. The next rally will set the tone for the following 4-6 weeks. Short-term cycles project an interim low next week. See the XAU cycle for a detailed account.

XAU Weekly

Miners have been range-bound for over a year. The junior mining index stopped at the upper boundary and reversed sharply. Prices formed a weekly swing high and closed below the 10-week EMA (steps 1 and 2 in confirming an intermediate cycle high). We need to proceed carefully. Miners will confirm a breakout and restored uptrend with a weekly close above 92.94. A decline to the lower end of the range remains possible until prices breakout above 92.94.

XAU Cycle Chart

The XAU cycle has marked turning points every 20-24 trading days. The turns arrive between the 4th and 10th of each month. We expect a low sometime next week. Miners have been much weaker than gold. They have fallen below multiple moving averages and closed below the January 9th pivot low. A broader correction into early March remains possible. The rally out of next week’s low will determine the medium-term (4-6 week) structure. Note: The number of days is measured in trading day's not calendar days.

We should see a low next week. The strength of the subsequent rally/bounce will define the 4-6 week trend. I see two possibilities.

1) Prices bottom next week and then rally sharply above 90 to attempt another breakout.

2) Prices bottom next week but the bounce fades, and the trend rolls over. That would generate a secondary correction into early March before attempting the next breakout.

Gold Daily

Gold prices are holding up much better than miners. We should see a low next week. I'll look for support around the 50-day EMA.

Silver Weekly

Silver prices are building a strong base. We should see an explosion higher when prices break firmly above the trendline.

Silver Daily

Prices are at the upper end of the ideal target box. I'd like to see signs of bottoming before re-entering short-term trading positions.

GDX

Prices are at the 200-day MA. We should see a cycle bottom sometime next week. GDX would have to rally and close above $24.20 to restore the technical damage done to the chart. Failure to recapture $24.20, would suggest a better low in early March.

GDXJ

Prices are near the target box, and we should be approaching a low. Prices would have to rally and close above $34.75 to repair the short-term technical damage. Failing to recapture $34.75 will lead to a sustainable low in March.

Gold Prices: The 2018 Breakout (Update)

The short-term action has been volatile, and investors are growing concerned. There have been bearish calls citing $1000 and even $900 gold. We feel prices are closer to a breakout and I’d like to review the big picture. Our long-term forecast remains intact, and precious metals are well-positioned for a meaningful breakout.

Gold

There have been several tests of the green pattern breakout line in gold. We expect prices to break free in 2018 and work their way to the larger pattern high ($1,923). Gold would have to decline and remain below the 200-week MA to neutralize the bullish 4-year basing pattern. Note: The 50-week EMA crossed above the 200-period MA, and the 200-week MA turned higher. Both are signs of a trend reversal and burgeoning bull market.

The multi-year basing pattern in gold is sound. The larger the base, the more meaningful the breakout. Gold attacked the long-term trendline at $1,365 in January and turned back; not unusual. Prices tend to probe a certain level several times before finally breaking free. Total Energy (TOT) formed a comparable basing pattern, and it provides an excellent roadmap for gold.

Total Energy Basing Pattern

The basing pattern in TOT is similar to gold. I’d like to draw your attention to the green pattern breakout line. Prices tested the trendline several times before finally breaking free. After the breakout, prices maintained the 200-week MA. They approached the pattern highs, and consolidation is likely. Prices should eventually breakout above $61.49 and establish new all-time highs. Note: The 50-week EMA crossed above the 200-period MA. Then prices remained above the 200-week MA. I expect the same for gold.

In conclusion, we expect a short-term low next week. The subsequent rally will determine the medium-term (4-6 week) outlook. The large basing pattern is intact, and we anticipate a breakout in 2018. If verified, a sustained uptrend will carry gold to the $1900 level and ultimately to new all-time highs. Intermarket analysis supports a bull run into late 2023 to early 2024 before prices deteriorate into the next 8-year cycle low.

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