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June 10, 2016

Gold Cycle Sets Up for New Rally

Gold appears to be swinging into a new weekly cycle. Recent action around its daily and weekly TrendBands show classic behavior for the decline into a cycle low and the subsequent commencement of a new cycle. Let's begin with the weekly view:

A close below the UpperBand, but not the LowerBand, is typical of a right-translated cycle. This week's close back above the UpperBand confirms a cycle low. We should now see 4-5 months of rally into the next cycle peak.

The last weekly cycle measured about $260 from trough to peak... quite a healthy showing. A similar performance for this new cycle would put our little yellow friend in the high $1400s before the next cycle decline.

Gold's daily cycle behavior conveys the same message:

As with the weekly picture, a close back above the UpperBand confirms a weekly cycle low. Gold oddly formed a RT daily cycle into the weekly cycle low, but as I noted in a previous post, daily cycles have produced some strange counts in recent years (across all assets), forcing me to give much more weight to the weekly views. The important takeaway here is the action around the TrendBands.

Interestingly, mining shares performed very well as gold played out its relatively minor weekly cycle decline. Several favorites, including SLW, FNV, and GDX, even touched new rally highs this week. Some traders may express concern over the "overbought" RSI levels on these shares, but RSI has been at these levels for three months, and more likely indicates trend mode rather than reversal. I bought some gold this week and am sitting tight with my mining shares.

 

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