Gold on Verge of Generating Intermediate-term Cycle High Signal

| September 8, 2011

Gold closed moderately higher today, reacting off of support at the lower boundary of the power uptrend from July and approaching recent all-time highs of the secular bull market from 2001. As expected, the market has become extremely volatile following the initial breakdown of the unsustainable advance from early July to late August and a negative divergence has formed between technical indicators and price behavior, indicating that the development of an overbought correction is becoming more likely.

The intermediate-term cycle from early July has failed to move up to meaningful new highs during the last three weeks and the decline this week is on the verge of generating an intermediate-term cycle high signal.

A close below $1,830 tomorrow would cause the second price oscillator to experience a bearish crossover and a bearish engulf pattern to form on the weekly chart, indicating the likely formation of an intermediate-term cycle high (ITCH) last week and forecasting two to three months of consolidation or correction heading into the next intermediate-term cycle low (ITCL) in late October or early November.

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Category: Commentary, Market Update

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