Gold: A Critical Crossroad This Week (Part 2)

Senior Technical Analyst
March 17, 2015

Part 1 of this article is HERE.

Gold price analysisWill Gold Bottom this week or will a capitulation phase begin?

We covered capitulation in part 1 (Gold: A critical crossroads this week) of our three-part editorial series. In this part we will discuss how a low may very well arrive this week. First, I would like to encourage those Precious Metal Investors that have been frustrated and discouraged by the trying multiyear correction. Gold was up 12-years consecutively before it started this correction, and that is an anomaly. The current correction has been equally unusual but once it’s over the Bull market should resume.

I often study and refer to the 1970’s Gold Bull Market, it can essentially be broken down into two phases. Those phases are separated by a grueling and tiresome correction comparable to this one. It lasted one-third the length of the initial rally phase and corrected roughly 48%. It’s hard to ignore the similarities between then and now, when this extended correction finishes the second stage will begin, and it should be spectacular.

We will now turn our focus to the intermediate term. As stated many times this week the Wednesday Fed meeting will likely influence the next several months. Prices will either bottom this week heading higher or the Fed Comments will surprise and crash prices through the previous Biannual Cycle Low of $1,130. Market participants are expecting a Fed rate hike in June of this year if their statement postpones that then prices will likely climb higher quickly. Conversely, if they announce a rate hike much sooner than markets expect then metals will likely head lower. Lastly, the Fed needs to address the strong US dollar sometime this year, and the decisions they make regarding that will have profound global effects.

Gold Daily Chart

 In this chart you’ll see we are nearing the timing window for a Biannual Cycle Low (BCL), with this marking the 19th week, the two previous Biannual Cycles ran 22-weeks in duration. With the lack of countertrend moves coming out of the $1,307 high, the slightly shorter 19-weeks is likely enough time to make a BCL. If price closes well below the previous BCL of $1,130 anytime this week, then we will need to look at the capitulation versions more closely. There may be wild swings on Wednesday (3/18/15), and if price closes near the highs of the day then I will be inclined to think that the Biannual Cycle Low (BCL) has arrived. The Chartseek Example Portfolios will alert their subscribers when trades are executed.

gold daily chart

Gold Weekly Chart

Once the Biannual Cycle arrives we will carefully monitor the price and momentum out of that low to determine which scenario may be playing out. It’s important that we are patient allowing things to unfold in the manner in which they happen. We should resist forcing price into a particular scenario but rather observe and adjust as needed.

gold weekly chart

Gold Monthly Chart

In this big picture view the chart shows potential support at the 200-month moving average. Once the second phase begins, it will become much easier trading and making money.

gold monthly chart

We will continue diligently watching, listening and updating our subscribers to the changes and markets forces as they appear. Chartseek.com offers several affordable Newsletters services as well as the Standard and Advanced Example Portfolios.

Pierce Wellington is the Senior Technical Analyst and a head trading consultant. After making unwise decisions early in his trading career, he developed a passion for Education, Technical Analysis and Trading Discipline. He has successfully traded the Gold and Silver markets for over a decade and is a Chartered Market Technician (CMT).


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