Gold Price Short-Term Rally Due – Mid-Term Still Down

With the mid-term trend still pointing lower, gold prices continued to push to lower lows into last week, with the metal dropping all the way down to a Thursday bottom of 1262.40 - before bouncing slightly off the same into the weekly close.

The Short-Term Cycles

For the very short-term, the smallest cycle that we track is the 10-day wave, which is now some 15 days along - and with that is into extended range for a bottom. The next short-term rally should come from this cycle, and should see the 10-day moving average or better acting as a magnet:

The next dominant cycle above the 10-day wave is the 34-day component, which - as pointed out last weekend - was seen as heading south off the 1313.00 swing top:

In terms of patterns, with the larger 34-day cycle currently pointing south, the probabilities will favor any short-term rally with the smaller 10-day component to end up as countertrend - holding at or well below the 1313.00 figure (August, 2018 contract). If correct, a drop to lower lows should be seen on the next downward phase of the 10-day cycle, which would then be the odds-on favorite to trough the larger 34-day wave. From there, a rally back to the 34-day moving average or better should materialize.

The 72-Day and 20-Week Cycles

Stepping back, the current downward phase of the 34-day cycle should ideally be the one that bottoms the larger 72-day and 20-week waves - each of which are well into normal bottoming territory. Where (from what price) these larger cycles will bottom is still up in the air, though the assumption is that it will come from lower lows than already seen - and perhaps after a bounce in-between, coming from the smaller 10-day component.

Going further with the above, any reversal above the 1313.00 figure (August, 2018 contract) - if seen - would also be our best indication that the 72-day and 20-week waves have troughed. Here again is a chart of our most dominant cycle, the 20-week one:

Stepping back further, if and when our 72-day and 20-week cycle bottom is set in place, a rally of 8-16% or more should materialize on the next mid-term upward phase. I am actually favoring that higher percentage number to be seen, due to the fact that the next low for these waves is also likely to end up as the bottom for the larger 154-day and 310-day cycles - where the average rallies are around 20% from trough-to-peak.

Longer-Term Cycles

Stepping back even further, the next larger cycle is the 154-day component, which is shown on the following chart:

The low that is seen for the 72-day and 20-week waves should also end up as the bottom this larger 154-day component, and what follows should be a minimum rally back to the 154-day moving average or better. Having said that, with the average statistical rallies being in the range of 8-16% with the 72-day and 20-week cycles, a rally in that price range (or better) is eventually favored.

Above the 154-day wave is the 310-day component, which is currently seen as 370 days along from its last labeled trough, and thus is also looking for its bottom at anytime going forward:

With the current configuration of the smaller 72-day, 20-week and 154-day cycles, any reversal back above the 1313.00 figure would be a better-than-average indication that this larger 310-day wave has also bottomed. Basically then, that 1313.00 figure is a key number for the mid-term picture.

Gold Timing Index

For the mid-term picture, our best indicator of trend direction for the gold market is our Gold Timing Index, which is shown again on the chart below:

From the comments made in past articles, our last sell signal with the Gold Timing Index came back in February of this year, with gold (continuous contract) trading at the 1340 level. In past issues of my Gold Wave Trader report, I have noted the tendency for buy/sell signals in our Gold Timing index to coincide with tops and bottoms in this same 310-day cycle component.

With the above said and noted, a divergence between price and our Gold Timing Index is the initial requirement for a mid-term buy signal - which we are currently seeing; however, there is no guarantee that this divergence will remain intact. For the actual mid-term buy signal, our Gold Timing Index would need to see a close back above its upper standard-deviation band, which it has yet to do.

Commercial Hedgers

In looking again at the COT numbers from last week, the commercial hedgers covered about 25,000 of their recent shorts, in the process dropping their current net short total down to 114,124 contracts, with the data current to the 6/18/18 close:

From the comments made in recent articles, the best support for a mid-term rally phase for gold is the position of the commercial hedgers, which are holding one of their smallest net short positions seen in recent years. Notwithstanding the above, as long as the metal remains below the key 1313.00 figure, it will continue its bearish downtrend before the next bottom of significance attempts to form.

The Overall Bottom Line

The bottom line for the short-term is that a rally is soon due to materialize, and should come as a result of the 10-day time cycle. Until proven otherwise, that rally is favored to end up as countertrend, holding at or well below the 1313.00 figure. If correct, lower lows should follow, before re-attempting a bottom with the larger 34-day, 72-day, 20-week, 154-day and 310-day cycles - the combination of which should launch the net mid-term rally phase, a rally expected to be in the range of 8-20% or more. Stay tuned.

Jim Curry

The Gold Wave Trader

http://goldwavetrader.com/

http://cyclewave.homestead.com/

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