I think next week will mark a major turning point in the gold market. Depending on whether the dollar continues higher or turns back down we will either see a resumption of the D-Wave decline or this will just turn into a normal run-of-the-mill intermediate degree correction followed by another leg up in this 2 1/2 year C-wave advance.
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First the pros:
The COT report has now reached a maximum bullish level on the commercial contracts. In the past this has always marked major bottom turning points.
Sentiment & breadth have reached extreme bearish levels (contrary indicator).
Also there is a much larger T-1 pattern in play that fits the normal parameters much better than the smaller version.
In my opinion next week is going to be critical. Either the current daily cycle is going to break down below $1600 in a left translated manner, in which case we will probably see gold continue sharply lower to test the 75 week moving average and the consolidation zone of the large T-1 pattern. Or if gold (NYSE:GLD) can gain some traction and breakout of the recent trading range to the upside then the smaller T-1 pattern comes in to play and we should see gold make another run at $2000.
This is a guest post by Toby Connor at Goldscents.
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