The question now remains whether gold is stuck in a D-wave decline or whether the action since December has just been a very tricky midpoint consolidation before the C-wave finishes its run.
I will say the recent strength despite a strong dollar is very encouraging.
There are four important requirements that have to be met before we can say with a high degree of confidence that the C-wave is still in play.
First, the single most important is the dollar. We simply must see the intermediate dollar cycle top. No C-wave has been able to fight a rising dollar. What I’ll be looking for is a weekly swing high on the dollar chart as a sign the intermediate cycle has topped.
I will note the dollar is getting late enough in the cycle that it could put in a top at any time. Not to mention we are starting to see a large momentum divergence forming.
Second, the next requirement is for gold to put in a right translated daily cycle. If this remains a D-wave decline then all daily cycles should be left translated. If gold can eclipse $1131 this week then we will have a right translated cycle and the second requirement will have been successfully met. With today’s close above $1133, this key requirement is satisfied.
The $1161 price level will also eliminate the December trough as the intermediate cycle low. Instead, the most recent intermediate cycle low would become February.
This is very important as it would mean gold is on week 4 of the intermediate cycle (which typically runs about 20 weeks) instead of week 10. In effect, this puts 6 more weeks on the shot-clock for the second leg of the C-wave to progress.
Fourth and finally, we need the miners to start participating. If the HUI can cut through the 420 resistance level that will be a big step in the right direction. With the HUI close today above 420, this key requirement as also been met.
If miners can break out to new highs later this month all resistance in the gold market will be out of the way and the path will be clear for the second leg of the C-wave to rack up another monster move.
Gary Savage, The Smart Money Tracker
Gary Savage is currently retired and lives in Las Vegas. He is the author of the Smart Money Tracker, a financial blog with special emphasis on the gold secular bull market.