At the beginning of the week, the strong start to the beta phase rally of the current short-term cycle suggested the likely transition to a bullish translation. Friday, gold closed sharply higher, moving above the last alpha high (AH). The close well above the AH during the beta phase rally reconfirms the transition to a bullish translation and favors additional strength during the next short-term cycle.
With respect to technical analysis, the move well above congestion resistance in the 1,740 area is a short-term bullish development that reconfirms the reaction from early November.
Our Gold Currency Index
(GCI), which tracks the intrinsic value of gold as an international currency, also experienced a strong advance Friday. The slight positive divergence between the GCI and gold in US dollar terms that we noted at the beginning of the week remains in place, favoring additional short-term strength.
From an intermediate-term perspective, we are three weeks into the new cycle from the beginning of November. The character of the initial rally phase of the new cycle will indicate if the bullish translation from May is likely to persist, so it will be important to monitor the rebound off of the latest ITCL.
With respect to technical analysis, the consolidation formation on the weekly chart that we have been monitoring since early September continues to track the bullish scenario that we outlined at the time, favoring an eventual resumption of the secular bull market.
The consolidation formation has entered a crucial stage of its development and market behavior during the next several weeks will likely signal if the secular bull market is preparing to resume. Therefore, it will be important to continue monitoring gold closely.