Analysis with price cycles is flashing the green light for gold. The first cycle is the seasonal cycle which is depicted in the monthly histogram below in graph one. The bars represent the expected return for each month. Note that August and September have been the two most bullish months in any year. From July 7th to October 10th, price has risen 63% of the time since 1968. This accounts for only one cycle, the annual cycle. There are many cycles operative at any one time. A scan reveals all cycles which are active and profitable now. This composite of such cycles is depicted in graph two. This rising cycle supports the bullish seasonal histogram.
The current market conditions support the cycle projection. In terms of price level, gold is at the 38.2% retracement level of the 2015-2022 rally. If a market is in a bull phase, this level is unlikely to be penetrated on any declines. A drop below this zone suggests that investors’ view of gold fundamentals have shifted to bearish. In terms of momentum, gold is oversold both daily and weekly. Sentiment is bearish for the metal and overly bullish for the dollar. This climate favors a golden rally.
The $1830 level is a reasonable target by the end of September.
Graph 1-Annual Gold Histogram
Graph 2-Monthly Gold Cycle
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