The gold cycle indicator finished the week at 358 and within the range of minimum topping. What’s that mean? It means gold has met the minimum requirements for a cycle top. Now that doesn’t mean prices will peak immediately. It merely suggests the 6-month cycle is nearing maturity, and we should start preparing ourselves for a cycle peak.
I drew target boxes for gold and miners. I think gold could reach between $1685 and $1730 within the first week or two of March. Metals have shown a tendency to reverse in the opening days of a new month. Consequently, I will be watching the price action during the first week of March closely.
It’s at this point members begin to ask how far will gold drop once it peaks. My standard response is: Until I see where this cycle tops, it’s senseless to consider the next bottom. We have to take things one step at a time. I will say this however, the last two corrections were mild, we are likely due for something a little more intense.
For premium members, our trade alert system continues to hold positions and NUGT and USLV. I will look to take profits in the coming days/weeks once a peak becomes likely.
-US DOLLAR- The dollar is up sharply this year and reached new highs this week. The trend is overbought and due for a pullback. Capital is fleeing Asia to the US over fears of the coronavirus. That is why gold and the dollar are rising together, a flight to safety.
10-YEAR YIELDS: Yields on the 10-year treasury are challenging the September low. Asian capital fleeing the coronavirus has found a home in US bonds driving yields lower.
-GOLD- I’ve drawn my preferred target box for a cycle peak in March. Of course, an unforeseen event could drive prices higher or lower than expected. My estimate suggests a target between $1685 – $1730. On the off chance, the coronavirus drives US stocks piercingly lower in March, then gold could extend to around $1785.
-SILVER- From a technical standpoint, silver should (at least) exceed the previous cycle peak of $19.75. However, I still see explosive potential to finish this cycle, but time is running short. There needs to be significant progress above $19.00 next week to maintain this perspective.
-PLATINUM- Bearish forces remain dominant in platinum thanks to the coronavirus, and prices were unable to close progressively above the $1000 level. I still think we could see a sharp rally to finish this cycle, but a jump to $1200 is growing unlikely.
-GDX- Although prices haven’t officially closed above the September $30.74 high, it looks like we have a pattern breakout. To estimate targets, I add the depth of the cup to the top of the pattern. In this case, GDX suggests a $34.70 target. Prices have underperformed gold of late, so I’m estimating a range between $33.00 and $35.00, to be on the safe side.
-GDXJ- The cup with handle pattern is much cleaner in GDXJ. Prices are decisively above the $43.00, and we have a breakout. The pattern target is $52.00. I provided a range between $50.00 and $54.00.
-SPY- We have seen money flow out of Asia and into US stocks over concerns of the coronavirus. That, combined with short-term liquidity injections from the Fed, has pushed stocks into oversold territory. The MACD is diverging negatively, and I see the potential for a correction, possibly severe. Closing below January’s low would validate this concern and support a decline to 300 to 305 and perhaps the 200-day MA.
-WTIC- Oil did bottom in the opening days of February as forecasted. However, with lower growth expectations out of China, I think prices will remain range-bound for the foreseeable future.
Have a safe and pleasant weekend.