I still have a “B” wave peak in Minor degree as the decline could fit into a diagonal 5 wave sequence. It is priceless to see gold scream higher and end in a near vertical spike to the upside at the end of the month and the end of a year. Even though gold gave us an impressive run so far, I believe a correction is due. Of course, this correction may never happen if the entire move in gold was just a bear market rally! Gold sliced through the 200-day MA on this daily chart, but on the weekly chart gold just hit the 200-day MA. That hints of resistance which matches many of the peaks in 2017.
I labeled the Aug/Dec run as a triangle which can happen in 4th waves, but the exact same wave count can double as a diagonal set of 5 waves with a degree adjustment. A potential diagonal wave one will still force a substantial correction for gold, where gold can crash back down to the $1200 price level before it cranks up again. This move has the look of a “fear” run as it started at the same time stocks started to move to the downside. Gold would have to travel much further before a Golden Cross is created. The 50-day may not reach the 200-day MA before gold turns down again.
The December 20th COT reports showed that the commercials were making a very bearish move by adding to their already net short positions. At the same time, the commercial hedgers removed long positions which just adds to their bearish outlook. We’re not at any extreme but it sure does not support any huge bullish phase still to come. Gaps to the upside have opened up, so they will get filled before gold can keep heading north.
Meanwhile, the speculators are taking the exact opposite side of the trade as they are chasing this bull market. FOMO is a very powerful motivator, but emotional moves seemed to have a limited lifespan.
Silver has also soared with the COT reports showing the same moves as with gold. 2019 is a new year and we could get a new direction in gold as well. Gold peaked in 2011 which matches the first peak in solar cycle #24, this peak was not some little peak in an ongoing bull market, but it was a once in 30-year mania peak. In this case, it was 30 +1 years from the 1980 peak. 1950 was the previous peak all matching Cycle degree peaks. Do not underestimate the power of the solar cycles on gold as solar cycle turnings seemed to attract but can also alternate by repelling.
2011 was a wave 3 peak in Cycle degree so until I see a complete zigzag or flat coming to an end, I will look for the bearish moves.
Commodities run on a different idealized diagonal pattern than what stocks do, and it was the Roaring 20’s when impulse waves started to take over and the choppiness of commodities disappeared.
Have a Safe and Happy New Year!