This is an exciting time to be watching GOLD because the (inverted) cycles are all lined up in anticipation of a 4 & 1/2 year PEAK.
In early May this year I published an STÂ Outlook about GOLD, in which I discussed the possibility that GOLD is best analyzed using inverted cycles (in which the peaks of the cycles are synchronized as opposed to the troughs). Price movement in the past 4 months has exhibited very clear “inverted” behaviour as it has streaked towards a peak.
Our preferred analysis is the inverted one, and so I present that analysis here (data up to Friday 2 September 2011):
The long term picture shows the phasing analysis performed with inverted cycles, and how the price of GOLD has rushed up towards the anticipated 4 &1/2 year peak. Long term FLD’s (20-week to 54-month displayed) are forming a beautiful cascade pattern, warning of an impending hard downward fall. Note that price has not yet crossed these FLD’s, keeping us safely out of the short side of the market until the peak is confirmed.
The medium term picture shows the detail of the most recent 40-week inverted cycle. One can see that the 4&1/2 year cycle peak was expected in the third week of July (and is now therefore showing a variation of +2.5%), and the synchronized 18-month peak was expected on the 18th of August. The number of bars and time periods since the last peaks of various cycles are plotted on the chart. They are:
- 40-week cycle: 38.4 weeks (about 4 weeks longer than nominal, but shorter than recent cycles)
- 20-week cycle: 17.6 weeks (about 3 days longer than nominal, but shorter than recent cycles)
- 80-day cycle: 72 days (4 days longer than nominal, and equal to recent cycles)
- 40-day cycle: 22 days (another 12 or 13 days expected before next peak)
All of this evidence means that the price of GOLD is ripe to form the peak of the 4&1/2 year cycle. The peak could turn out to have occurred on the 23rd August, but the cycles break down better with one more push up (over the next 9-10 days – bear in mind this data goes up to Friday 2 September, and so as of this writing there are 3 bars of unknown price movement).
The short term picture shows the current 40-day cycle rising to a peak expected shortly (as indicated by the red-filled projection box). This is the synchronized 4&1/2 year peak according to the current analysis. Thereafter price will fall back to the 1700 level initially. Then a trough of the 40-day cycle will form, but of course once the 4&1/2 year cycle peak is confirmed we expect price to fall much further, and it might well fall so fast that it becomes difficult to identify the shorter cycle troughs.
Price levels we are watching which would confirm the formation of the 40-day cycle peak (for Tuesday 6 September 2011):
- 10-day FLD: 1857.15
- 20-day FLD: 1809.80
The 40-day cycle is currently too short to use the 5-day VTL to make any trading decisions but it could be seen as an early warning sign if crossed at 1887.65. Bear in mind that these are median price levels.
