Gold Correlation Chart To Watch

There was a knee-jerk reaction in gold, silver, and stocks as the polls began to support Trump late last night. Markets have since calmed, and the immediate spikes higher in precious metals retreated. The current price action is similar to the performance of gold during the fall of 2000, and it’s something we should watch.

Over the weekend, I found a striking correlation in gold worth bringing to your attention. If the relationship continues, the gold chart between late 2000 and early 2001 may provide a roadmap for the coming weeks. Prices need to decisively break away from the 2000 price structure to avoid the possibility of a deeper decline into the first quarter of 2017.

2000-2001 GOLD PRICE CORRELATION

-DAILY GOLD 2000-2001- Notice the A-B-C-D-E pattern in the fall of 2000. After the sharp “E” decline prices climbed casually for about 3-weeks (slow start), thrust into a high, followed by prices dropping into a low. From the $270.30 low prices rallied for 9-trading days but failed to make a new high and subsequently rolled over. After the confirmed breakdown, prices dropped for several more weeks into a secondary 8-year low in early 2001.

 

-DAILY GOLD CHART NOW- IF gold continues to pursue the 2000-2001 structure, prices should thrust into the red box on or before November 11th; potentially just did. From there we should see gold prices correct a bit and then a price rally that fails to make new highs. IF price fails to make a new high and then drops below the corresponding low, a price breakdown will be confirmed. In this scenario, prices would drop into a secondary 8-year low early in 2017.

 

Now this is not a prediction, and I certainly wouldn’t base trades off this chart until we have a confirmed breakdown. However, there are way too many similarities to simply dismiss it.