Gold closed sharply lower this week, moving down to support at the middle of the Bollinger bands on the weekly chart. A subsequent weekly close well below current levels would predict a return to support at the lower boundary of the cyclical bull market from 2008 near $1,635.
As noted on Thursday, the decline this week generated a cycle high signal, indicating that an Intermediate-Term Cycle High (ITCH) likely formed last week.
The confirmed early formation of an ITCH would be a bearish development favoring additional weakness heading into the next Intermediate-Term Cycle Low (ITCL) in early 2012. Additionally, it remains possible that the recent high in August was a meaningful inflection point and market behavior during the next several weeks will likely provide an important signal with respect to long-term direction.