Excertos:
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The seasonal cycle in gold averages 11.45 months. This cycle last bottomed April 8, 2003 at 319.80. Knowing that the seasonal cycle was coming due, I began to be concerned about gold back in January and particularly in February when we saw some of the short-term cycle lows violated. This indicated that the intermediate-term, 18-week cycle, as well as the longer-term seasonal cycle, had topped. It was because of this shorter-term cyclical breakdown combined with the fact that the seasonal cycle top was due and that the monthly oscillators had begun to move down that I found so alarming.
Then came the decline on April 13, 2004. Technically, this was a hard blow to the gold market because it violated the previous trading cycle low, which again occurred on April 5, 2004 at 414.50. Please see the daily gold chart below. I was looking for a trading cycle low to occur around 410. In my weekend update I had told subscribers that it looked like the trading cycle low had occurred and that gold had no business below 414. With the decline below 410, I moved to the sidelines on gold.
The reason that the 410 to 414 level was so important was that it marked the April 5, 2004 trading cycle low. Notice on the chart above that when the intermediate-term trend is moving up, each trading cycle low holds above the previous low. Also notice that at the intermediate-term, 18-week cycle tops that once the previous trading cycle low is violated it marks a trend change as gold then moves into the next 18-week, intermediate-term low.
So, the point here is, Yes, the March low was an important low as it did mark the bottom for the current 18-week intermediate-term cycle. However, with the recent violation of the April 5, 2004 low at 414, all indications are that this cycle has topped out and thereby was a failure. The decline into the seasonal cycle low is likely still at hand. Based on the timing of the next intermediate-term low, we can expect to see the seasonal cycle low occur sometime in the July timeframe.
I also did an analysis of all seasonal cycle declines in Bull market periods and found that the decline into the seasonal cycle low has averaged 3.13 months in duration. So, based on this average, we can expect to see gold continue down into July. It is purely coincidental that July is also the expected timing for the next 18-week cycle low, but the fact that two different measures give me the same answer tends to confirm the prognosis.
Understand, this is not a piece to “bash” gold. I don’t bash anything as I have no agenda to do so. I call it like I see it technically and we currently have technical issues to work through before gold becomes a buy again. After all, the current seasonal cycle has seen a heck of a run. History shows that the average advance for a seasonal cycle in a Bull market is 8.5 months. We just experienced a 12-month advance that saw a 35.4% rise. So, history shows that this has been a longer than average run with a very good advance. Expecting more is not supported by the historical norms. Gold has performed well and it’s now due a rest. Expecting more would be just plain greedy and greed will get us hurt. Once the seasonal cycle low occurs, regardless of the level, gold will present its next buying opportunity and guess what, we will be able to buy it cheaper than it is now. What a deal, I can’t wait.
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