Gold Price Forecast: Gold And Stock Market Update

Sunday, July 14, 2019

gold analysis

The gold market held in a sideways consolidation pattern last week, with the metal forming its low in Tuesday's session with the tag of the 1387.50 figure (August, 2019 contract). From there, higher prices were seen into Thursday, here spiking all the way up to a high of 1429.40 - before consolidating the action into Friday.

Gold Cycles Still Up - But Topping Soon

As pointed out in past articles for Gold-Eagle, the mid-term cycles called for a mid-term bottom to form around the mid-May timeframe, plus or minus, with the actual low made in early-May (5/2/19), doing so with the tag of the 1272 figure. That move was expected to end up as a countertrend affair, against the August, 2018 bottom - the prior mid-term trough.

In terms of price, in our Gold Wave Trader report, we noted that a reversal back above the 1305 figure was our best indication that the mid-term cycles had bottomed for gold - and that the next move was a sharp rally into mid-to-late Summer, which we are obviously in the process of right now. In terms of price, the suggestions (based upon an analysis of past mid-term upward phases) were that a move up to the 1420's or higher would be seen.

With the above said and noted, the larger cycles are deemed to be pointing higher into at least the month of August, as evidenced by our dominant 154-day cycle, which is shown again on the chart below:

In terms of time, the upward phase of this 154-day wave is expected to remain in force in the coming months, which favors the current downside consolidation pattern to end up as an eventual countertrend affair. In other words, the probabilities will favor a push back above the 1442.90 swing top in the coming weeks, where the metal should be setting up for a sharp correction phase into late-Summer. In terms of time, the exact details for the next peak - and decline phase - are noted in our thrice-weekly market report.

Gold Commercial Hedgers

The biggest argument for another decent correction phase into late-Summer is the position of the Gold commercial hedgers, which is shown on our next chart:

With the action seen last week, the hedgers have covered some 8,000 of their recent shorts, which puts their current net short total at 278,416 contracts, with the data current to the 7/9/19 close. Having said that, the fact that they are holding such a large position is ultimately a bearish indication, and supports the idea of a decent correction playing out in the coming months - though, ideally, from higher highs than already seen.

Going further with the above, the hedgers are holding a much larger bearish position than they were at the February, 2019 peak - and are holding a similar-sized position to that seen at the September, 2017 top. This can only be seen as a technical negative for gold, though it does not tell us when the next decent swing top will occur. For that, we have the cycles as our guide, which are still pointing higher at the present time.

U.S. Stock Market Update

In taking a look at the U.S. stock market this weekend, our basic outlook in recent months called for a correction into the mid-May timeframe, with the 45 and 90-day cycles - a move which was expected to end up as countertrend. That low ended up being made on 6/3/19, bottoming out with the tag of the 2728.81 SPX CASH figure. From there, the probabilities favored strength - and new all-time highs - into the mid-Summer timeframe, which we are now in. Take a look at the chart below, which shows our 45-day time cycle:

In terms of time, the 45-day cycle is seen as some 28 trading days along - and with that is at or into normal topping range. Once it does peak, then the probabilities will favor a correction back to the 35-day moving average in the coming weeks, with that decline expected to end up as a countertrend affair, likely holding above the 2874 SPX CASH figure.

In terms of price, until a higher level materializes, it would currently take a reversal back below the 2961.94 SPX CASH figure to confirm a turn with the 45-day cycle. Otherwise, above that number and higher highs are likely heading into the new week, with our reversal level expected to rise as we move along, and which is updated in real-time in our Market Turns report.

Stepping back, a countertrend correction with the 45-day cycle in the coming weeks - if seen as expected - should give way to higher highs on the next upward phase of this wave, then to be on the lookout for a peak with the larger 90-day cycle, which is shown on the chart below:

In terms of price, it is speculation as to where the next 90-day cycle top will come from, though I am getting some indications it could reach up to the 3060's or better before peaking. In terms of time, the next peak for this wave looks like it could materialize around the mid-to-late August timeframe, plus or minus.

Stepping back further, from whatever high that forms with this 90-day cycle, the probabilities will favor a larger percentage decline playing out into the early-Autumn timeframe, one which sees the 70-day moving average acting as the minimum price magnet - but a move which is expected to end up as countertrend, against the early-June trough of 2728.81 on the SPX.

Stocks, Longer-Term

For the bigger picture with U.S. Stocks, as pointed out many times in prior articles, our last mid-term trough was registered with the combination of the 180 and 360-day time cycles, with that low registered back in December of 2018 with the tag of the 2346.58 SPX CASH figure. Take a look at the next chart:

The chart above updates the larger 360-day cycle to real-time. In terms of price, I mentioned in prior articles that I expected the SPX to reach - at minimum - the low-end 3000's. This was due to an open upside target with this 360-day cycle (triggered many months back) to the 3003.29 - 3112.42 SPX CASH region - and which has now been satisfied with the action into last week.

Having said the above, there are even higher upside targets for this 360-day cycle - targets which are considerably higher than current price levels. And, since 85% of these targets end up being met, these should be enough to scare off the mid-term bearish case for now.  

The Bottom Line

The overall bottom line for gold is that the metal should be in a countertrend consolidation, one that gives way to higher highs in the coming weeks, before setting up for a larger percentage correction. As for the U.S. stock market, the 45-day cycle is at or into normal topping range, with the next decent short-term correction phase expected to come from this wave - and which is due to bottom later this month. That correction is favored to end up as countertrend, and should give way to higher highs into later this Summer, then to peak the larger 90-day wave for a bigger correction into early-Autumn. 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.