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Last week’s trading saw gold spiking sharply higher into Wednesday’s session, with the metal pushing all the way up to a high of 1856.60. From there, however, weakness was seen into Friday, here dropping back down to a low of 1810.10 – before bouncing off the same into the weekly close.
The Short-Term View
For the very short-term, as mentioned last weekend, the next good rally phase is expected to come from the 34-day cycle, which is shown again on the chart below:
In terms of price, the lowest low seen for this component was made with the February 4th tag of the 1784.60 figure (April, 2021 contract), from which a decent short-term bounce has been seen. Even with that bounce, it is too early to say whether this 34-day cycle has actually bottomed, though the detrend that tracks this component is starting to favor that to be the case. Having said that, our 34-day momentum indicator is still pointing south at the present time, thus casting doubt on the detrend’s assessment.
With the above said and noted, the key with this 34-day component is price action. That is, any reversal back above the 1880.00 figure (April, 2021 contract) – if seen at any point going forward – would be our best indication of a turn higher with this cycle. In turn, that action would favor additional strength through the same into what is projected to be the early-March timeframe, plus or minus.
Going further with the above, we can reverse the assumption and say that, as long as the 1880.00 figure is able to hold any near-term strength (as it did with the action into last week), there is still the potential for a spike back to or even below the early-February low in the coming days. Should this path instead materialize, that new low would be the odds-on favorite to trough this 34-day cycle.
Gold Closing in on the Finish Line
Stepping back, the next larger-degree low has been expected to come from the 310-day wave, which is shown again on the chart below:
As noted in prior articles, the choppy action with gold comes from the opposing position of the 154 and 310-day cycles. That is, the smaller 154-day wave bottomed back in late- November of last year – and has been pushing higher off the same. On the flip side, this larger 310-day wave is currently projecting lower into the month of April – thus resulting in the larger sideways-to-down consolidation.
The ‘finish line’ is the point where the 310-day cycle bottoms – which should end the larger decline phase that began back in early-September of last year. As mentioned, the detrend indicator – which is always the best guesstimate of where this wave will next trough – is projecting a mid-April low. Having said that, this is a BIG cycle, and with it does carry a large plus or minus variance in either direction.
Bullish Long-Term Trend
Going further with the above, there are a couple of observations that are again worth mentioning this weekend. Of note is that the 310-day moving average is currently moving to the upside, which means that the larger trend with the four-year cycle is still pointing higher – and with that is seen as a bigger bullish indication for gold.
Going even further, of secondary mention is that that price has recently been spiking down to or below the lower 310-day cycle band (in red). With the 310-day moving average pointing higher – and with the larger four-year wave still seen as pushing upward – drops below the lower 310-day band are normally very good spots to add to the long side. I have isolated past instances of this occurrence on our 310-day chart with blue arrows.
Gold’s Mid-Term Picture
In terms of price, as mentioned in prior articles, we noted that the 310-day moving average was acting as the eventual downside price magnet – and which has recently been met, with the spike to the downside into early-February. With that, our normal minimum expectation has been satisfied in regards to this component, though there is still some time left before the wave itself is due to trough.
In summing up the above, we can say that any price expectation has been met for the larger correction phase, and that the next key event will be the bottoming of this 310-day component. Once this low is in place, a multi-month rally is expected to unfold, one which has the good potential to spike back to our upper 310-day cycle band – which is some 350 points above current price levels. More on all as we continue to move forward.
Jim Curry
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