E Gold Cycle Inverted

It’s clear to me now that Fed chairman Powell’s November comment aborted gold’s expected December low. Prices were set up for a late-November breakdown and mid-December bottom – just like years past. That changed instantly with Powell’s comments and turned what should have been a left translated daily cycle into a right translated and inverted cycle. Unfortunately, that stripped us of a quality December buying opportunity.

So now that it’s clear the cycle inverted what should we expect?

  • I think miners may have already topped. If correct, we should see a 1-3 week decline.
  • Gold – it should peak next week if it hasn’t already.
  • Silver – we could get a spike high, and it may be the last to top.

Overall, I think prices are coming into tops and should correct into mid-January.

  • Short-term – I’m thinking about trying JDST again. I was shaken out last week, but I think it may be worth another shot- I’ll decide Monday.
  • Medium-term – I’ll need to see the depth and quality of the next correction. If it’s constructive, I may attempt net-longs. I’ll be monitoring silver closely. Prices must hold the $14.80 level in January to prevent another breakdown.
  • Longer-term – I think precious metals and miners are gearing up for another nice run. From 2000 – 2010 tangible assets like commodities were the outperforming asset class. From 2010 – until NOW paper assets (stock/bonds) were the place to be. I think we are in the process of switching back to commodities.

GOLD WEEKLY

Prices were breaking down from the bear flag into what would likely evolve into a mid-December low – just like the last several years. The decline stopped suddenly in late November when Fed chairmen Powell said rates were close to neutral. Just two months earlier he announced rates were far from neutral. I believe his dovish retreat aborted the November decline. The fact that gold continued to rally after the Fed raised rates on December 19 and called for two additional hikes in 2019 suggests prices are returning to a bullish bias. Consequently, it looks like the $1167 low will hold for the foreseeable future.

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