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Talking Points
- Long-term bull market time retracement
- Price action over next couple of weeks is critical
Gold Throws a Curve Ball
I have been focused on the first few weeks of the second quarter in gold because of the chart above. It shows that this month is the 38% retracement of the amount of time between the low in 1999 and the high in 2011. It suggests that the metal could be at an important inflection point. I had been looking for the metal to weaken into this period as a secondary low into this month would (in the way I look at things) have confirmed the low in gold late last year as being something quite significant and open the door to a much more aggressive rally in the months ahead. With the metal strengthening into the turn window we have gotten a bit of a “curve ball”.
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The risk in my view now is that we put in some sort of meaningful high shortly and undergo a few weeks/months of pronounced weakness. The reaction around 1285 over the next couple of weeks will likely be key. A failure to gain much traction (marginal high OK) above 1285 over the next few weeks followed by a break of 1225 would warn that a top is indeed playing out. In previous writings I have compared “turn windows” to highway exits. Just because they are there doesn’t mean that the market has to take them. When markets ignore an ‘exit’ it is often as powerful if not more so than a turn itself as it signals the underlying trend is incredibly strong. If gold can ignore this ‘time resistance’ and make new highs into the end of the month then I think we can start talking about a much more important bull market here. This would fit well with the long-term timing relationships exhibited in silver at the lows in 2014 and last December.
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--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX
