After reaching our March $1700 target, gold entered a sharp, liquidity-driven, selloff. Prices plummeted to $1450 but have since recovered ($1642 as I write). So is the bottom in, or should we expect more selling? Our work supports more selling.
I’m very bullish on gold long-term and believe prices are going much, much higher. But in the meantime, I think we need to be careful. Our cycle work indicates the next sustainable low may not arrive until May or early June.
In the chart below, you’ll notice some regularity to the peaks and valleys for each cycle. The global meltdown that began in March skewed the near-term chart, but it shouldn’t abort the cycle. The typical decline into a 6-month low takes anywhere from 4 to 10-weeks before prices bottom. The recent plunge to $1450 lasted just 5-trading days, that’s way too short to be considered an intermediate-term correction.
Potential Suckers Rally
The commercial hedgers and gold manipulators are good at two things. Making money and tricking retail investors. One of their favorite tricks is to push prices back to or just above a recent high to trap breakout buyers. Once everyone has bought, they flood the market with sell orders. I’ve seen this too many times to count.
The recent commitment of traders (COT) report shows commercial shorts fell from a record 385,612 contracts to 301,709. A decent reduction but nowhere near where I’d like to see it. A drop to around 200K or lower seems appropriate.
In summary, I believe gold is in the second or third inning of a 9-inning game. Precious metals should prove to be the best performing asset class throughout the 2020s. Physical bullion is preferred. Gold miners and futures are volatile and often manipulated. Take a long-term approach, and you’ll be fine.
AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit https://goldpredict.com/
This article was originally posted on FX Empire