Gold Price Forecast: Gold's Countertrend Decline

Sunday, July 7, 2019

gold bars

The action into last week saw gold forming its low for the week in Monday's session, here doing so with the tag of the 1384.70 figure. From there, a sharp rally was seen into Wednesday's session, with the metal running all the way up to a peak of 1441.00 - before selling down off the same into Friday.

Gold's 154-day Cycle

From the comments made in past articles, our mid-term cycle count had suggested a mid-May bottom for the 154-day time cycle, which is shown again on the chart below:

In terms of price, reversing back above the 1305.00 figure (August, 2019 contract), seen on 5/31/19, was our best indication/confirmation that this 154-day cycle had bottomed, and that a multi-month rally was underway.

Going further with the above, in our Gold Wave Trader report we noted that the normal low-end rallies with this 154-day cycle - based upon its past history - were in the range of 11.5% or more off the bottom. With that, the suggestion was that a test of the 1420's or better would be seen, and which has obviously been met with the action in recent weeks.

Even with the above said and noted, the upward phase of this 154-day component is expected to remain in control for many more months, and we see the potential for a move on up to the 1500's or better in the next month or two, though the bigger picture could see even higher numbers before the next peak of significance attempts to form.

Gold's Countertrend Decline

Even with the mid-term trend deemed to be heading higher in the coming months with the 154-day cycle, there will still be the normal bumps and grinds along the way - the first of these we are in right now. That decline was forecast to come from the smallest cycle that we track, the nominal 10-day component, which is shown again on the chart below:

In terms of price, our minimum target for the most recent decline was back to the 10-day moving average for the metal, which was easily met with the action that followed. Having said that, in our reports we noted the potential for a drop back to the 20-day moving average - due to the downward phase of the next larger cycle, the 20-day wave. Thus, with the action seen into late last week, this has also been satisfied.

In terms of patterns, however, due to the configuration of the aforementioned 154-day cycle, the probabilities favor the current short-term correction phase to end up as a countertrend affair, holding above the 6/11/19 bottom of 1323.60. If correct, then the overall path should favor another push back to or (ideally) above the 1442.90 swing top in the coming days/weeks, a move which would set up yet another short-term peak-and-decline phase.

Gold's 72-day Cycle

For the more medium-term picture, the next decline of significance is expected to come from another cycle that we track, the 72-day component, which is shown on the chart below:

Going further with the above, the 72-day wave is less-dominant at the present time, though is seen as heading higher off the early-May bottom. Of note is that our 72-day 'oversold' indicator (shown in the lowest pane) has recently moved into the lower reference line, which is something we might expect to see near a market top. Having said that, this indicator will normally turn before price at market peaks, as it did well before the February, 2019 top.

Stepping back then, from whatever high that forms with this 72-day wave going forward, we should expect to see a minimum decline back to the 72-day moving average in the months to follow, with this key moving average currently at the 1321 figure (August, 2019 contract) - but is rising as time progresses. Thus, with this wave not expected to trough for a few more months, we should expect to see this key moving average at considerably higher price levels by that time.

Commercial Hedgers

Due to the holiday-shortened trading week last week, we won't have the updated data from the CFTC until early this week.

The Bottom Line

The overall bottom line for the gold market is that a mid-term upward phase is currently seen as in force with the 72-day and 154-day cycles, with the combination of these waves bottoming back in early-May. In terms of price, we see the potential for an eventual move up to the 1500's for the metal, though we are currently in what is viewed as a countertrend decline phase with the smaller 10 and 20-day cycles, one which should be at or near completion. 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.