Gold Short-Term Cycles Still Up

With the action seen last week, gold finally managed to put in a decent rally, with the metal forming its low in Monday's session with the tag of the 1189.60 figure - before re-testing that level into Thursday/Friday. From there, a sharp move higher was seen into late-day Friday, here pushing all the way up to a peak of 1215.40 - also ending managing to end the week at or within earshot of the same.

The Short-Term Picture for Gold

As per the comments made in my last article, the 8/17/18 reversal above the 1190.60 figure (December, 2018 contract) was our best indication that a short-term rally phase was back in force for gold. In terms of price, that put the 10 and 20-day moving averages as normal minimum price magnets, with each of these having been met with the recent rally.

Even with the above said and noted, the short-term cycles should remain pointing higher into what is looking to be the early-September timeframe, where a countertrend peak is expected to form. From there, the ideal path calls for a drop back to lower lows for the bigger swing, before the larger cycles put in a bottom. In terms of price, there is resistance to the current move up at or into the 1227-1264 level, which encompasses the 38-61% retracement zone of the last swing down.

Medium-Term Outlook

From the comments made in recent outlooks, for the mid-term cycles to confirm a turn back to the upside, gold (December, 2018 contract) would currently require a daily close back above the 1263.50 figure. With that, as long as the current short-term rally is able to remain below the same, a drop back to lower lows (below 1167) would be ideal into the mid-to-late September timeframe. Support to that move would be firm at or near the 1128 figure, which is larger 'swing support' - and is plus or minus 10 points in either direction.

Going further with the above, the mid-term cycles currently in control - and are each well into extended bottoming range - are the 154 and 310-day cycles for gold. Once these waves do confirm a low in place (which could now only be indicated by a daily close above 1263.50), the probabilities will favor a rally of 8-19% to be in force, with the low-end figure being the lowest statistical inference - and with the larger (19%) figure being the average rally in coming off a 310-day cycle trough.

Adding to the notes above, the 154 and 310-day moving averages would also be expected magnets to a mid-term rally phase, due to my #1 in regards to cycles and moving averages. In terms of time, that rally would be favored to last at least 5 weeks off the bottom, though the average has taken two months or more before the next mid-term peak attempted to form.

Gold Timing Index

As pointed out recently, the divergence between our Gold Timing Index and price ended up being negated at the 1167.10 swing bottom. And, since that divergence has been present before nearly every mid-term bottom for the metal, the assumption is that the current short-term rally will end up as a countertrend affair, and - if correct - will give way to lower lows on the next downward phase into mid-to-late September.

If price does drop to lower lows into the mid-to-late September timeframe - if a divergence is seen between our Gold Timing Index and price - then we will have to be on the lookout for our expected mid-term cycle bottom. Otherwise, should our Timing Index manage to close back above its upper standard-deviation band before that divergence is registered, then it would be viewed as a sell signal for the metal.

Commercial Hedgers

In taking another look at the COT data from last week, the gold commercial hedgers covered another 5600 shorts, which drops their current net short total down to only 1685 contracts, with the data current to the 8/21/18 close.

From the comments made in past articles, the fact that the commercials are currently holding their lowest net short total in several years is very strong support to the idea of a mid-term rally phase eventually playing out with gold. Even said, price is more important, and the metal would currently need to see either a daily close above the 1263.50 figure to confirm that rally to be in force - or else would require a new mid-term buy signal from our Gold Timing Index. More on all as we continue to move forward.

Jim Curry

The Gold Wave Trader

http://goldwavetrader.com

http://cyclewave.homestead.com

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's above.

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