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Gold verification of 8 year cycle

Jan 1st, 2017

Background

The precious metals complex has reached a major inflection point during this period of verification as to whether gold’s 8 year cycle low is now (Jan-Mar 2017) or whether it was in fact Dec 2015.

Key triggers are:

  • Silver penetrating down below $15.68;
    • or up through $16.60;
  • Gold penetrating down below $1140.00;
    • or up through $1170.00;

Other key influencing factors are of course the US$ and the correlation between gold and the Japanese Yen.

US$

The US$ broke up through a triple top 2 year consolidation which now indicates a much higher upside target of between $108 – $112. The key breakout level of $100.60 needs to be penetrated on the downside to in any way alter this bullish outlook. Despite a slight downwards correction at the moment (providing gold with it’s upwards correction) much further US$ downside looks unlikely. This presupposes gold is still going to move down before up.

ussmall

Correlation between Gold and the Japanese Yen

This correlation continues, broadly speaking, but the weakening trend in the currency still indicates more downside in the gold price before reversing up again.

jyensmall

Gold price

The gold weekly chart closed higher after 7 consecutive lower closes and needs to penetrate upwards through 10-Wema at about $1170 before registering any real signal of a potential bottom.

goldweeklysmall

The gold daily chart indicates a bottom at $1124.30 followed by 10 higher closes in the first major correction since 30 trading days from the high at $1309.30 at the beginning of Nov 2016. This uptrend seems to have terminated last Friday, although this still needs to be verified. A move below $1140 would verify termination of the uptrend and a move higher than $1170 would validate the bottom at $1124.30.

Gold indicated a bearish ‘dark cloud cover’ candle last Friday.

golddailysmall

Silver price

Silver indicated a bearish ‘engulfing’ candle last Friday, and if this now heralds a further price drop below $15.68 then the market is likely to continue dropping into a 8 year cycle low with a further sharp selloff.

silversmall

Conclusion

The US$ is likely to reverse it’s slight downwards correction and pursue higher targets in the $108 – $112 region. This is likely to retard any Japanese Yen strength, and the precious metals complex is likely to drop further before reaching true bottom in the 8 year cycle low, approximately within the next 3 months.

The capitulation selloff will produce price bottom in gold at estimates varying between $900 – $1000, and in silver potentially below $10, as silver will drop further and faster than gold. Gold miners will react to this in even more pronounced further and faster declines.

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