With gold futures slipping to $1725, it’s time to revisit the cycle count and potential scenarios for September.

GOLD CYCLE: Gold has been forming cycle lows every 40 to 44-trading days (blue arrows). What do all these lows have in common? Fed rate hikes. The next low should arrive around September 14 (+/- a few trading days). Note- the next Fed announcement is September 21.

That means metals and miners could drift lower over the next 2, possibly 3-weeks.

Will gold break the July $1678.40 low in September? With futures currently just $50 above long-term support at $1675, the odds are starting to support a temporary breach.

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Possible Capitulation

With gold prices weakening and approaching long-term support – we are entering a potential zone for capitulation. Capitulation is when bulls lose faith, turn bearish and exit the market.

Institutions often nudge (manipulate) prices below a significant psychological or technical level to create a selling climax. The selling climax provides the necessary spike in volume allowing {big money} the cover to switch from shorts to longs and maximize profits. Unfortunately, retail traders unaware of these tactics will often sell at or near the bottom.

Below are three scenarios for September:

Base Case Scenario: Gold dips temporarily below $1675 in September, perhaps reaching $1625 to $1650. Retail traders capitulate, prices bottom, and start a new uptrend.

Bullish Case: Gold stands firm and holds $1675 through September. That would support a bullish run and retest of $2000 by year-end.

Bearish Scenario: A September capitulation triggers a cascade of sell orders forcing gold below $1600 temporarily. In this scenario, I’d be surprised if prices fell below $1580.

Final thoughts: A spike lower in the paper price of precious metals is almost always temporary because low prices trigger a surge in demand for physical metal.

Inventory for coins and bars disappears quickly as savvy investors take advantage of artificially low prices.

Dealers order and restock inventory, thus triggering more demand and pushing prices higher. Hence the cure for low prices is low prices.

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