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Gold Should Be Completing A Cyclical Low

ByDavid Banister
Published 02/22/2013, 03:15 PM
Updated 07/09/2023, 06:31 AM

Over the past five years we have seen gold either complete an intermediate cyclical top or bottom in each February. My forecast was for this February to be no different and for gold and silver to make trough lows this month. I did not expect the drop in gold to go much below $1,620 per ounce at worst, but in fact it has. Where does that leave us now on the technical patterns and crowd-behavioral views?

First, let’s examine the last five years. You can see the tops and bottoms in the chart below:
Gold: The Last Five Years
That brings us to today's $1,573 spot pricing as we try to determine where the next move will be. To help with that, some of our work centers on Elliott Wave Theory, along with fundamentals and traditional technical patterns of course. In this case, the recent action around gold has been very difficult to ascertain. That said, one pattern we can surmise is a rare Elliott formation known as the “Double Three” pattern. Essentially you have two ABC type moves and, in the middle, what is dubbed an “X” wave, which breaks up the ABC’s on each end of the pattern. For sure, if we add in traditional technical indicators along with sentiment, we can see very oversold levels coupled with the potential Double Three pattern and we probably start getting long here for a trade back to the $1650’s as possible:
Rare 'Double Three' Pattern
Obviously this chart shows oversold readings in the lower right corner using the CCI indicator. That said we would like to see $1550 hold on a weekly closing basis to remain optimistic for a strong rebound.

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