GOLD TRADE ALERT (2:30 pm EDST)
Gold prices have been unusually bullish in their sharp rise from a new medium-term cycle that started on Feb. 28 at $1807. Today gold briefly exceeded $2000 before pulling back sharply. This testing of the $2000 level is coming close to challenging the all-time highs of $2066 in March 2022 and $ 2070 in August 2020. We have been labeling those two highs as a "double-top" to a long-term 23 year cycle in gold that should be coming to an end by next year with a final correction that could take prices back down to around $1000.
I am still favoring that bearish labeling of the long-term cycle, but gold's current bullishness is increasing the likelihood of an alternative labeling that I have mentioned in earlier blogs. That would be the idea that gold's 23 year cycle ended in 2022 with the double-bottom lows of $1616 on Sept. 28, 2022 and $1617 on Nov. 11, 2022. The difference between these two scenarios is dramatic as the alternative labeling would mean that gold is just beginning a new 23 year cycle, and that would be VERY bullish with prices pointed sharply up for many more years. The older cycle labeling (which I am still favoring at the moment) would mean gold prices are ready to take a dramatic drop of up to 50% over the next year or two!
So what should be our trading strategy here? We are currently nearing the end of a very strong reversal zone for gold (and silver) that ends Tuesday but overlaps with a strong general reversal zone (for all markets) that ends Thursday. Gold prices have been rallying strongly into both. Today's strong pull back from a top just above $2000 is a bearish signal that could signal a reversal is imminent. If gold's long-term cycle is old and bearish, this current medium-term cycle is likely peaking early here and will turn bearish as it starts to fall below $1807. If gold's long-term cycle is new and bullish, any corrective drop will be modest and not go below $1807 before the rally resumes and soon challenges and exceeds those double-top highs from 2022. Any new highs after Thursday would support this idea. Because I am still favoring the bearish scenario, I think it is worth entering a short position in gold at this juncture and waiting to see how far down any correction will go. If that $1807 level holds, we can cover our short trade and reverse to the long side if appropriate later.
I am therefore going to enter a short position in gold today. We can set a tight stop loss for this trade based on gold breaking and closing above $2000, and especially breaking and closing above those double-top highs at $2066 and $2070.
As I mentioned in Friday's blog, unlike gold, it's a bit early for the current medium-term cycle in silver to be having its final peak. Therefore, any imminent corrective drop in silver would either not go below the presumed start of the cycle on March 10 (at $19.91) or would make a double-bottom to that low. Either way, any correction might present us with a good buy spot in silver. Silver seems like it could be more bullish than gold right now, and prices still may have the potential to rise as high as $28 in this new medium-term cycle. We will stay on the sidelines of silver for now.
Gold prices have been unusually bullish in their sharp rise from a new medium-term cycle that started on Feb. 28 at $1807. Today gold briefly exceeded $2000 before pulling back sharply. This testing of the $2000 level is coming close to challenging the all-time highs of $2066 in March 2022 and $ 2070 in August 2020. We have been labeling those two highs as a "double-top" to a long-term 23 year cycle in gold that should be coming to an end by next year with a final correction that could take prices back down to around $1000.
I am still favoring that bearish labeling of the long-term cycle, but gold's current bullishness is increasing the likelihood of an alternative labeling that I have mentioned in earlier blogs. That would be the idea that gold's 23 year cycle ended in 2022 with the double-bottom lows of $1616 on Sept. 28, 2022 and $1617 on Nov. 11, 2022. The difference between these two scenarios is dramatic as the alternative labeling would mean that gold is just beginning a new 23 year cycle, and that would be VERY bullish with prices pointed sharply up for many more years. The older cycle labeling (which I am still favoring at the moment) would mean gold prices are ready to take a dramatic drop of up to 50% over the next year or two!
So what should be our trading strategy here? We are currently nearing the end of a very strong reversal zone for gold (and silver) that ends Tuesday but overlaps with a strong general reversal zone (for all markets) that ends Thursday. Gold prices have been rallying strongly into both. Today's strong pull back from a top just above $2000 is a bearish signal that could signal a reversal is imminent. If gold's long-term cycle is old and bearish, this current medium-term cycle is likely peaking early here and will turn bearish as it starts to fall below $1807. If gold's long-term cycle is new and bullish, any corrective drop will be modest and not go below $1807 before the rally resumes and soon challenges and exceeds those double-top highs from 2022. Any new highs after Thursday would support this idea. Because I am still favoring the bearish scenario, I think it is worth entering a short position in gold at this juncture and waiting to see how far down any correction will go. If that $1807 level holds, we can cover our short trade and reverse to the long side if appropriate later.
I am therefore going to enter a short position in gold today. We can set a tight stop loss for this trade based on gold breaking and closing above $2000, and especially breaking and closing above those double-top highs at $2066 and $2070.
As I mentioned in Friday's blog, unlike gold, it's a bit early for the current medium-term cycle in silver to be having its final peak. Therefore, any imminent corrective drop in silver would either not go below the presumed start of the cycle on March 10 (at $19.91) or would make a double-bottom to that low. Either way, any correction might present us with a good buy spot in silver. Silver seems like it could be more bullish than gold right now, and prices still may have the potential to rise as high as $28 in this new medium-term cycle. We will stay on the sidelines of silver for now.
RSS Feed