Gold Price Forecast: Gold In Consolidation - Stocks Minimum Decline Met

Sunday, December 8, 2019

gold analysis

Last week's trading saw gold bottoming on Monday, here doing so with the tag of the 1459.80 (February, 2020 contract). From there, a sharp rally was seen into mid-week, with the metal pushing all the way up to a high of 1489.90 - before selling off the same into Friday's session. 

Gold's Short-Term View

For the very short-term, the most recent rally came from the 10-day cycle, which is shown again on the chart below:

From my article posted last weekend: "for the short-term then, the upward phase of the 10-day cycle is deemed to be back in force, with the ideal path favoring additional strength into the new trading week, with the decent potential for a test - or push back above - the prior 10-day top (1486)."

Current Analysis: As noted last weekend, the upward phase of the 10-day cycle was deemed to be in force, an assessment which favored a push back to - or above - the prior peak for this component, which was the 1486 swing high, registered on 11/20/19. We did get that with the strength into the middle part of last week, with the metal running all the way up to a peak of 1489.90, before selling down into late-week - an action which confirms the downward phase of the 10-day wave to be back in force.

With the above said and noted, the most recent high for the 10-day cycle was slightly bullishly translated to the right, peaking at the 6 trading day mark. As mentioned, its downward phase is deemed to be back in force with the decline into late last week, with the next 10-day trough projected for the December 9th date, but which is plus or minus a day or so in either direction.

72-Day Cycle's Upward Phase Yet to be Confirmed

As mentioned in prior articles, the next decent multi-week rally phase has been expected to come from the larger 72-day cycle component, which is shown again on the chart below:

In terms of price, there is the potential that this 72-day wave bottomed out at the 1453.30 swing low, registered back in mid-November. Having said that, we are looking for confirmation of that, which has yet to materialize.

For that confirmation, in our Gold Wave Trader market report we noted the 1490.00 figure (February, 2020 contract) as the key number that had to be reversed back above, in order to confirm an upturn in our 72-day cycle. We did come very close with the recent tag of the 1489.90 figure, though 1490.00 remains our key number.

Stepping back, if the 72-day cycle has bottomed, then the expectation would be for higher prices into the month of January, with the 72-day moving average acting as the magnet - though with the decent potential for additional strength through the same. In terms of patterns, however, that move would be expected to end up as a countertrend affair - within the downward phase of the larger 310-day cycle that we track.

Adding to the comments above, if the upward phase of the 72-day cycle were to already be in force (again, yet to be confirmed), then we would expect the current correction with the smaller 10-day wave to end up as countertrend, to be followed by higher highs on the next swing up into later this month. From there, another short-term correction, followed by higher highs again into January, before looking for a countertrend peak with the larger 72-day component. Time will tell, and the action into early this week looks to be very critical.

Gold's Sentiment Picture

In looking at the latest numbers from the CFTC, the commercial hedgers added in approximately 17,000 new shorts to their already large net bearish position, thus putting their new net total at some 322,787 contracts - with the data current to the December 3, 2019 close. Here is the chart:

As mentioned many times in prior months, the current net shorts held by the hedgers should be a continued negative indication in the coming months, particularly in light of our mid-term 310-day time cycle, which is pushing lower in the coming months. On or before this larger-degree wave bottoms, we should see the net shorts by the hedgers start to be reversed, though for now their configuration is still viewed as a mid-term bearish indication for the metal.

U.S. Stock Market

As pointed out in recent weeks, the next peak of significance for U.S. stocks was expected to come from the most dominant cycle that we track - which is the 45-day wave. Here again is that particular cycle:

As noted above, the 45-day cycle is currently the most dominant cycle that we track in stocks, with that wave recently moving into extended range for its peak - and subsequent correction phase. In our daily Market Turns report, the action into early last week signaled the downward phase of this wave to be back in force, with the overall expectation calling for a drop back to the 35-day moving average on the SPX (S&P 500 index).

With the above said and noted, our minimum assumption was met with the decline into last Tuesday, with the 45-day wave likely having bottomed out at that low. In terms of patterns, the recent correction phase of this cycle was expected to end up as a countertrend affair, holding well above the early-October trough for stocks - which was our last 45-day bottom.

Going further with the above, if the downward phase of the 45-day cycle is complete - as is the suspicion - then the probabilities will favor a push up to the 3200's or better in the coming weeks, before forming another 45-day top in January. From there, a bigger percentage correction would be expected to unfold, though that correction would be favored to end up as countertrend - against the most recent 45-day trough.

For the bigger picture, our overall assessment has remain unchanged from past months. That is, back in late-Spring of this year we had confirmed an upside target to the 3279.07 - 3437.63 SPX CASH region, which remains intact at the present time - and which is acting as the mid-term price magnet:

The chart above shows one of the largest cycles that we track in stocks, the 360-day (or 18-month) wave. The next mid-term peak is expected to come from this same cycle, and is ideally due to play out into early-Spring of next year. Once that peak does form, we should expect to see the largest percentage decline witnessed since the drop into the December, 2018 price low, with this drop likely playing out into early-Summer of 2020. 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.