Gold Breaks Below Short-term Uptrend Support

| September 12, 2013


Gold closed sharply lower today, breaking well below support at the lower boundary of the uptrend from June. Technical indicators are moderately bearish overall on the daily chart, favoring a continuation of the decline from late August.

Our Gold Currency Index (GCI), which tracks the intrinsic value of gold as an international currency, also closed well below its comparable uptrend support level today, confirming the short-term breakdown.

With respect to cycle analysis, the sharp decline today has caused a change to our preferred scenario and it is now likely that the latest short-term cycle low (STCL) formed on September 6. Additionally, the move well below the last STCL during the last 4 sessions signals the likely transition to a bearish short-term translation.

Last week, we noted the potential development of the latest intermediate-term cycle high (ITCH) and the sharp decline this week confirms that the decline phase of the intermediate-term cycle from July is in progress.

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. As always, it is important to remember that a long-term bottom is a process, not an event. Now that the decline phase of the current intermediate-term cycle is in progress, the character of the move down into the forthcoming ITCL will provide the next assessment of cyclical trend health. Therefore, it will be imperative to monitor price behavior closely for the next several weeks.


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Gold closed sharply lower today, breaking well below support at the lower boundary of the uptrend from June. Technical indicators are moderately bearish overall on the daily chart, favoring a continuation of the decline from late August.

Our Gold Currency Index (GCI), which tracks the intrinsic value of gold as an international currency, also closed well below its comparable uptrend support level today, confirming the short-term breakdown.

With respect to cycle analysis, the sharp decline today has caused a change to our preferred scenario and it is now likely that the latest short-term cycle low (STCL) formed on September 6. Additionally, the move well below the last STCL during the last 4 sessions signals the likely transition to a bearish short-term translation.

Last week, we noted the potential development of the latest intermediate-term cycle high (ITCH) and the sharp decline this week confirms that the decline phase of the intermediate-term cycle from July is in progress.

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. As always, it is important to remember that a long-term bottom is a process, not an event. Now that the decline phase of the current intermediate-term cycle is in progress, the character of market behavior heading into the next intermediate-term cycle low (ITCL) will provide the next assessment of cyclical trend health. A shallow decline that holds well above the previous ITCL in July near 1,213 would signal the likely formation of a long-term bottom.

Alternatively, an extended decline that returns to the ITCL in July would suggest that long-term direction remains in question. Therefore, it will be imperative to monitor price behavior closely for the next several weeks.

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