Time-cycles for investing in gold are pointing to a sharp rally from here into September… and that’s just one of the many reasons why I think gold is headed up this summer.
Edward Dewey, the father of cycles analysis, described cycles as “the mysterious forces that trigger events.” It’s not hard to see why cycles analysis can sometimes seem almost mystical when you see a chart like this:
You can see here where we published this cycles-based forecast way back in March of this year. Gold started rallying the next day and gold has been following the cycles script with eerie accuracy for the past four months.
If gold continues following the cycles script, we should see a sharp rally between now and September. Let’s take a look at some of our other favorite indicators for gold today.
I don’t know about you, but I’ve been feeling a little nervous about gold for the last couple of weeks. I hate to admit it but I’m still influenced by the media at times. I know their track record is pathetic but when you see enough headlines and judgements of “experts,” doubt still starts to creep in.
That’s why I had to laugh when I looked at the latest TradeStops Stock State Indicator (SSI) chart on gold. It shows that… drum-roll please… gold is doing absolutely nothing.
Well, not exactly “nothing” but it is doing exactly what is expected of it. We EXPECT gold to move around, up or down, by about 11% in a year just because of the typical random movements of gold – i.e., gold’s volatility. From its recent high below $1,300, gold is down about 6% to just above the top of the Yellow Zone.
Gold isn’t a loser. It’s a snoozer!
Don’t you just love these SSI charts? I know I do. They keep things in perspective.
The volume-at-price chart for gold shows gold still trading comfortably in a strong area of support that extends down to around $1,210 and up to the $1,275 level. Nothing alarming or unexpected there.
How about our sentiment indicators from the gold futures markets?
Open interest has continued to trend higher this year from the lows made at the beginning of the year. This uptrend in volume has historically signaled that higher prices are on the way.
Also, the commercial traders of gold do not hold large bearish positions. That means producers of gold believe the price of gold is more than likely to rise in the near future and they are not hedging their positions.
Summing up… our time-cycles forecast has been dead on for gold this year and it’s pointing to a sharp rally for the rest of the summer. Support is holding everywhere for gold, both in terms of the SSI and the volume-at-price charts. And sentiment in the futures markets from those in the know is bullish.
Do I believe gold is going to trade up to the $1400 level in the next 8 weeks? Probably not. Keep in mind that time-cycle forecasts are most accurate at forecasting the likely direction of the price of gold rather than a specific target price.
The price of gold will continue to fluctuate and it’s not going to move in a straight line higher. But these gold price levels look like an excellent entry point for those looking to dip their toes into the water and/or add to their positions.
Staying the course,
Richard Smith, PhD
CEO & Founder, TradeStops