Gold Begins Important Short-term Cycle

| August 8, 2013


Yesterday, we noted the potential formation of the latest short-term cycle low (STCL) in gold. The strong advance today generated a cycle low signal, confirming that a new short-term cycle is in progress. The return to the STCL in July during the beta phase decline of the previous cycle suggests that cycle translation is in question, so it will be important to monitor the developing alpha phase rally carefully for the next signal with respect to short-term direction.

On the weekly chart, the oversold reaction off of the intermediate-term low that we identified in early July faces an important test in August.

From a big picture perspective, the question remains whether the intermediate-term low in July will also prove to be a long-term low that marks the termination of the cyclical downtrend from 2011. It is always important to remember that a long-term bottom is a process, not an event. It is too soon to know if a cyclical bottom is forming, but price behavior during the next few weeks will indicate if the bottoming scenario is becoming more likely. Therefore, it will be imperative to continue monitoring the gold market closely.


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Yesterday, we noted the potential formation of the latest short-term cycle low (STCL) in gold. The strong advance today generated a cycle low signal, confirming that a new short-term cycle is in progress. The return to the STCL in July during the beta phase decline of the previous cycle suggests that cycle translation is in question, so it will be important to monitor the developing alpha phase rally carefully for the next signal with respect to short-term direction.

Following the oversold reaction in July, gold retreated from strong congestion resistance in the 1,350 area. In order to reconfirm the developing short-term uptrend, prices will need to close well above the 1,350 level during the next advance. A failure to move up to new short-term highs would favor a return to the previous low of the current cyclical downtrend near 1,200.

From an intermediate-term perspective, the oversold reaction off of the intermediate-term low that we identified in early July also faces an important test at congestion resistance in the 1,350 area. A weekly close above the congestion zone near 1,350 would reconfirm the recent bullish momentum crossover and favor additional intermediate-term gains.

From a big picture perspective, the question remains whether the intermediate-term low in July will also prove to be a long-term low that marks the termination of the cyclical downtrend from 2011. It is always important to remember that a long-term bottom is a process, not an event. It is too soon to know if a cyclical bottom is forming, but a weekly close well above the 1,350 level would greatly increase the likelihood of the bottoming scenario. Therefore, it will be imperative to monitor price behavior closely as the new short-term cycle develops during the next two weeks.

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Category: Commentary, Market Update


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