Major Gold Cycle Playing Out Now

06/22/2012 11:24 am EST

Focus: COMMODITIES

A Fibonacci cycle spanning 13 years is evident in gold, explains David Banister of The Market Trend Forecast, and shorter-term implications suggest that a cycle low and buying opportunity will surface in the coming months.

Gold has been busy consolidating in what I believe will be a 13-Fibonacci-month primary wave 4 correction. The gold bull market I’ve been following since 2001 is a likely 13-year bull cycle that will end in 2013 or 2014, depending on how you count. 

This current correction pattern is working off a 34-Fibonacci-month rally that took gold from $681 to $1923 at its ultimate highs. Last fall, I warned about the parabolic run likely ending in the $1908 range and advised investors to position accordingly.

Today, we have gold trading around $1600, and our recent forecast in May was for a rally into mid-June topping around $1620-$1650. The intermediate-term forecast still calls for a possible drop to the $1445-$1455 range this summer, which is the same area I identified in a TheStreet.com interview last September for a primary wave 4 low.

Only a close and a strong move over $1650 will eliminate the downside risk, in my opinion. 

Below, we can see a weekly chart showing the 34-week moving average line, as well as the obvious downtrend line.

chart
Click to Enlarge

The 34-week moving average line acted as support during the primary wave 3 rally from $681-$1923. It now is acting as a resistance ceiling to break through, and I don’t think we will do so until this fall.

The likely cyclical lows for this gold correction will be in the October window, and investors should make sure they are positioned long by that time.

By David Banister of The Market Trend Forecast

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