We have been monitoring the gold market closely for the past several weeks in anticipation of the development of a meaningful low, and today’s sharp move higher was a bullish signal that suggests the anticipated low may be in the process of forming right now. Gold closed well above resistance at the upper boundary of the downtrend from early January on the daily chart, confirming the start of a new reaction.
From a temporal perspective, we are 5 trading days into the cycle following the Short-Term Cycle Low (STCL) on January 27, and today’s move up to a new short-term high is a bullish sign that indicates the current cycle may be right translated. If the developing reaction continues to strengthen and consolidates the gains of the past 5 sessions at current levels or higher, the bullish translation will be confirmed.
However, the most important potential development relates to the intermediate-term cycle. We are now 27 weeks into the cycle following the Intermediate-Term Cycle Low (ITCL) on July 30, and 90% of all intermediate-term cycles are less than 23 weeks in duration, so the next low is well overdue.
A strong close tomorrow would create a bullish engulf pattern on the weekly chart, signaling that the latest ITCL very likely occurred last week and forecasting additional gains during the next 2 to 3 months.