We’ll take a look at Gold today - all figures basis CSI-Perpetual Data.
My preferred view is a pull-back to the Primary Buy Zone in Figure 1 ($736 to 692) to complete a sideways correction; this is followed by a run up to a minimum target of $1260 and preferred target of $1538 - $1540 (Figure 2).
Let’s consider the reasons why I take this view.
Gold has an affinity for the 50% retracement level. When Gold first broke to the 38.2 level on the 12-month swing (yearly trend), $692, I was looking for a pullback to the 50% retracement of the downmove $1040 to $692. Instead the market double topped and appears to be on the way back down. If the 38.2% level holds, then we’ll see either a sideways congestion or a ‘pre-mature’ breakout. Steidlmayer taught that after a directional move, markets tend to develop (form sideways trends) - this is the ‘normal’ roadmap.
This idea is the reason for my preferred scenario for the market to dip to the Primary Buy Zone $736 to $692 before resuming the bull run. In addition, gold seldom corrects only to the 38.2% retracement level if the correction is a simple one.
If my preferred scenario is to prove correct, we can rely on a number of benchmarks:
- The first is a bear-conviction close bear move below the top of value $890 (Figure 3).
- The ‘death zone’, $843 to $796, needs to be watched. If the sideways scenario is to fail, the ‘death zone’ will hold and the market will have a bull-conviction close above $890 (i.e. will accept above $890) without first accepting below bottom of value at $796.
- If the sideways scenario holds, we’ll get to $796 without accepting above $890.00. From there the market may form a congestion between between the $890 and $796
- At some point the market will accept below $796 and head for the Primary Buy Zone $736 to $692 with the preferred zone being $739 to $703.
- If the sideways market is to be correct, the market should then head to the Primary Sell Zone without accepting below the Maximum Extension $623 (Figure 1)
So far as time is concerned:
- Seasonally there is a low due next week (MRCI Seasonal Charts); a high due in the 3rd week of May and a low due in the last week of May.
- The Hurst Cycles (using ChannelAnalyze), we have a high due this week, followed by a low on May 13.
I would like to see the Hurst Cycles and seasonals line up. When they don’t, as is the case here, I rely soley on the price action.
Figure 1 12M Gold 38.2% Retracement
Figure 2 12M Gold Target for Upside Breakout
Figure 3 12M Gold Top and Bottom of Value & ‘Death Zone’
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