Gold Forecast: Gold's Final Upward Phase Expected Choppy

Last week's action saw gold dropping into Wednesday's session, where the bottom for the week was registered with the tag of 1483.10. From there, a slingshot higher was seen into Friday's session, with the metal running all the way up to a peak of 1519.00 - before backing slightly off the same to end the day/week.

Gold's 72-Day Time Cycle

From the comments made over the past month or so, we know that the next good rally is expected to come from the upward phase of the 72-day cycle, which is shown again on the chart below:

In terms of time, in our Gold Wave Trader report this wave was projected to trough into the September 27 - October 4 region, with that low looking to have been registered right into this expected window. In terms of price, a drop back to the 72-day moving average was the expected minimum, which was obviously met into that bottom.

With the above said and noted, though we are awaiting confirmation of the same, if our 72-day cycle troughed back in early-October, then the probabilities should favor continued strength in the coming months, as the upward phase of this wave assumes control. In terms of price, that path would favor a push back above the 1566 swing top, though the more ideal path would be for a move into the low-end 1600's to be seen.

Going further with the above, if the upward phase of the 72-day cycle is in force, then we would expect to see any declines with the smaller-degree (i.e., 34-day on down) waves to end up as countertrend moves. Here is that 34-day cycle:

With the above comments, we should continue to be looking to buy these smaller-degree cycle lows - which is what we have been doing in recent weeks, with several in-and-out trades with the GLD (i.e., Gold ETF tracking stock). The next short-term bottom should come from our 10-day cycle, where we have an exact date for its next low to materialize:

Gold's Final Rally Phase

Stepping back, the upward phase of the 72-day cycle should be the one that tops the larger 310-day component. As for how this move should play out, we have expected it to be a choppy, labored affair - due again from the bearish implications from the commercial hedgers.

From whatever peak that ends up forming with the larger 310-day cycle, a sharp, multi-month decline is expected to play out into the Spring of next year. In terms of price, that decline should see the 310-day moving average acting as an eventual downside magnet. Here again is our 310-day time cycle:

In terms of Elliott wave, we have labeled the decline into early-October as a wave '4'. If correct, then wave '5' is in force - one that should give us our next mid-term price peak. Once again, that peak is expected to come from the combination of 72-day and 310-day time cycles.

For the mid-term picture then, from whatever peak that forms with the 72 and 310-day waves in the coming months, a very sharp decline should play out into the Spring of next year. In terms of patterns, the downward phase of the larger 310-day cycle is expected to end up as a countertrend retracement, against the August, 2018 bottom - which is the prior (major) trough for this cycle.

Commercial Hedgers

In looking again at the latest numbers from the CFTC, the commercial hedgers (chart, above) added in another 6,000 contracts to the short side, which puts their current net short (bearish) total to -301,216 contracts, with the data current to the 10/29/19 close.

As mentioned in past months, the current net short position held by the commercials is seen as an eventual bearish indication for the gold market going forward. Having said that, I noted that the hedger position was not necessarily an immediate technical negative, with the cycles supporting the idea of additional strength in the weeks/months ahead. However, the hedgers are positioning for a larger-degree decline, with that decline expected to come from the next downward phase of our 310-day time cycle.

U.S. Stock Market (Quick Update)

The last good low with U.S. stocks was also registered back in early-October, here doing so with the tag of the 2855.94 SPX CASH figure. Due to the configuration of the larger-degree cycles that we track, we expected that decline to end up as countertrend - against the early-August trough of 2822.12 on the SPX.

With the above said and noted, the assessment of a countertrend decline with stocks into early-October gave us 80-90% odds for higher highs on the next swing up with this component, which we have now seen met with the action into last week. In our Market Turns report, we put the 3050-3060 level as a price magnet to the upward phase of this wave.

With the above said and noted, we are again on the lookout for another short-term price peak, which should come from our larger 90-day wave, shown on the chart below:

In terms of price, it is too early to actually confirm a 90-day peak, though we are in the expected window for this to materialize. Either way, once this top forms, the SPX should see a 38-61% retracement of the prior swing up into the current month of November, though that move is expected to end up as another countertrend affair - against that early-October trough.

Stepping back then, following a countertrend decline with the 90-day cycle in the coming weeks, we are expecting the larger bull market in stocks to continue into at least the Spring of next year. In terms of price, we have an exact target for this move - as well as a major level of resistance - a target which was originally triggered back in late-Spring of this year.

For the bigger picture, however, we are on the outlook for a major top to occur in the U.S. stock market, though, as noted above, this peak is not expected to be made prior to the Spring of 2020. Once that top does form, we will be looking for a correction of 30% or more to play out in stocks - and which should come from a contraction in the economy.

Lastly with the above, bear markets are normal events, being cyclical in nature - and thus a decline of 30% or more will not be the end of the world, though you obviously don't want to be caught holding long positions during this decline. Stepping back further, that decline - if and when seen - should be the technical setup for another rally of 70-100% or more into the years 2022 or 2023, before another larger decline phase into 2024. More on this as we continue to move forward.

Jim Curry

The Gold Wave Trader

http://goldwavetrader.com/

http://cyclewave.homestead.com/

********