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Gold Forecast: The Rally Isn't Over
By: Jim Curry | August 1, 2021

Last week's trading saw Gold (August, 2021 contract) holding weaker into Wednesday's session, with the metal dropping down to a low of 1790.70. From there, however, a sharp rally was seen into late-day Thursday, here running all the way back up to a peak of 1832.10 - before backing off the same into Friday's session. For the week, however, the metal managed to end with a decent net gain of about 13 points. (Note: We now move to the December, 2021 contract for our numbers).

Gold's Short-Term Picture

As mentioned last weekend, the downward phase of the 10 and 20-day cycles was recently seen as in force, with the last short-term bottom expected to come from the combination of these waves:

From last Sunday: "the 10-day wave is now 9 trading days along from its last labeled low, which puts it at or into its normal bottoming range. In terms of patterns, due to the position of a larger 34-day wave, the probabilities tend to favor the downward phase of the smaller 10 and 20-day cycles to end up as a countertrend affair - which simply means Gold should remain above the late-June bottom of 1750.10. If correct, the next short-term rally phase is likely to make another attempt at our key dividing line of 1835.00."

As noted, the last short-term low was favored to come from the combination of the 10 and 20-day cycles, with the July 23rd low now confirmed as the last trough for these two waves. Here is the larger of the two cycles, the 20-day component:



In terms of patterns, the recent correction phase of the 10 and 20-day waves did end up as the expected countertrend affair. From there, our call was for a minimum push back up to the upper 20-day cycle band - which was easily met with the sharp rally seen into Thursday's session.

The strength into Thursday also satisfied the expected re-test of the 1835.00 figure (noted then for the August, 2021 contract) - which I mentioned last weekend to be a key dividing line for the metal. However, it was not able to overcome the same on a closing basis, which is even more key for the days/weeks ahead.

From last weekend: "More key again is the 1835.00 figure on a daily closing basis, which is the key dividing line for the larger 72-day component. In other words, in order to really trigger in the next good short-term rally for the metal, a close above this number has to be seen."

As mentioned, the 1835.00 figure for the August, 2021 contract was - and remains - our key dividing line going forward. For the December, 2021 contract, that number now moves to the 1839.80 figure, thus making this the level to watch as we head into the new trading week.

With the above said and noted, a daily close above the 1839.80 figure - if seen at any point going forward - would confirm the June trough as our last low for the larger 72-day cycle, shown again on the chart below:



Taking out the 1839.80 figure (December, 2021 contract) on a closing basis would then trigger the next upward phase of this 72-day wave to be back in force. In terms of time, if our key level is overcome, the detrend indicator is forecasting strength into the late-August timeframe or later, which would be the ideal spot to look for the next anticipated top for this component.

In terms of price, there is the potential for a spike back to or above the early-June high of 1923.80 in the coming weeks, if our key dividing line is closed above. Otherwise, if Gold can't get above the 1839.80 figure on a daily closing basis, then it will remain vulnerable, and with that will remain locked in a consolidation pattern.

Stepping back, the coming upward phase of the 72-day cycle will be the odds-on favorite to peak the larger 154-day wave, once again with a focus on the late-August timeframe or later to complete the same. Here again is that 154-day wave:



Once this 154-day cycle does top out, another good decline phase is expected to play out into later in the year, with more precise details of how we expect this to play out noted in our Gold Wave Trader report.

From whatever bottom that forms with this 154-day component, the probabilities will favor another larger-degree rally phase playing out into next year, one that will eventually peak the larger 310-day and four-year waves - though that is the subject for some future article.

For now, until a higher level materializes, it would currently take a reversal back below the 1754.00 figure (August, 2021 contract) to confirm this 154-day cycle to have topped, thus putting this as the key dividing line for the downside. This number should start to move up in the days/weeks ahead, depending on the action in-between. Stay tuned.

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