Gold closed moderately higher today, moving up to a new high for the oversold reaction from late December and breaking above resistance at the upper boundary of the downtrend from August. Technical indicators continue to strengthen on the daily chart and they are now bullish overall, strongly favoring a continuation of the reaction.
With respect to cycle analysis, the two short-term cycles following the Short-Term Cycle Low (STCL) in late December have exhibited extremely bullish translations and the strong move off of the Beta Low (NASDAQ:BL) yesterday favors additional short-term strength.
The Gold Currency Index (NYSE:GCI) is testing comparable downtrend resistance on its daily chart and a subsequent close well above current levels would reconfirm the oversold reaction from late December and forecast additional short-term gains.
The long-term overbought correction from September has developed in an orderly manner during the past five months and we are now four weeks into the intermediate-term cycle from late December.
The rally phase of the developing intermediate-term cycle has exhibited persistent strength in January, but it is too early to confirm that a sustainable long-term bottom has formed in gold. The US dollar index has rebounded sharply off of the concurrent long-term and intermediate-term lows that formed in August and the developing intermediate-term cycle has exhibited an extremely bullish translation.
Market behavior during the next two months will determine if a sustainable bottom in gold is likely in place, so it will be important to monitor the gold and US dollar index intermediate-term cycles closely. We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers.
Disclosure: I am long SGOL.