Current Analysis of Gold
Tim W. Wood
The 9-year Cycle
The dominant long-term cycle in Gold is the 9- year cycle. The last 9-year cycle low occurred in March 1993. The ideal timing for the current 9-year cycle bottom was 1st quarter 2002. However, it appears that the 9-year cycle bottomed in April 2001. This remains unconfirmed at this time.
The Seasonal Cycle
The next cycle of interest is the seasonal cycle. This cycle averages 1 year in duration. It can however, vary from 8 to 15 months. The August 2002 low at 299.50 marked the last seasonal cycle bottom. Absolute confirmation of this will occur if we see the coming weekly cycle low occur above the August low. At this point I fully expect this to be the case, but until price action provides the ultimate confirmation we can never be 100% certain. Upon this confirmation, the next seasonal cycle low is then ideally due to bottom in late summer or fall of 2003. Cyclically this makes sense. If the gold action is looking at the uncertainty of the stock market and I'm right about expecting to see the 4-year cycle in the stock market bottom around this same general time frame, the timing could work out perfectly. See the monthly gold chart.
I have been warning that based on my seasonal cycle statistics, gold has to make a new high after the 5th month from the August seasonal cycle low or we will have an 81% probability of a decline below the August low. This means we need to see an advance into February or later in order to clear the statistical hurdle. I repeat this only as a reminder for you to keep this historical fact present in your mind. Just because the action has been so strong doesn't mean were out of the woods. Yes, I remain bullish on gold at
this time, but I'm also very cautious. My market expectations are based on my cyclical statistics and until I see the market action confirm those
statistics I simply have to remain skeptical.
The Weekly Cycle
The next shortest cycle is the weekly cycle. This cycle averages 18 weeks in duration and it can vary from 16 to 23 weeks. The last confirmed weekly cycle bottom occurred the week ending August 2, 2002 at 299.50 along with the seasonal cycle bottom. The week ending January 31, 2003 concludes the 26th week from the last low. The ideal timing for the weekly cycle low was between November 22, 2002 and January 10, 2003. See the weekly chart for this timing window. This cycle has obviously either extended and if so should be running on borrowed time or we could have seen a contracted weekly cycle as explained below. Please note the weekly oscillator is very high, suggesting that gold is extremely overbought. The correction in gold will come, as the weekly cycle must, at some point, correct the recent rally.
At this time, I also have to consider an alternate cycle count for gold. That being the possibility that we could have seen the weekly cycle low occur the week of October 25, 2002. The count from the last confirmed weekly cycle low, which occurred the week ending August 2, 2002, to the low that occurred the week October 25, 2002 was only 12 weeks. The count for the half-weekly cycle is 9 to 12 weeks. Therefore, the timing of the October 25, 2002 low was perfect for the half weekly cycle low. However, from time to time cycles contract, expand and even skip a beat now and then so, at this point I must look at that possibility. Given the fact that both copper and
silver put in weekly cycle lows on October 11, 2002 it is highly likely that we saw a contracted weekly cycle in gold with the low, which occurred on October 25, 2002. If this proves to be the case, and I believe that it will, the ideal timing for the next weekly cycle low is between February 14, 2003 and April 4, 2003. Using this count, the week ending January 31, 2003
concludes the 14th week. So, in either case we should soon see a correction in gold, as the weekly cycle must, at some point, correct the recent rally.
The coming weekly cycle bottom should then present us with the next buying opportunity for gold.
The Trading Cycle
The trading cycle is the next shortest cycle of importance. This cycle averages 21 market days in length and can vary from 18 to 28 days. The
last trading cycle low occurred on December 31, 2002 at 341.70. The next trading cycle low is due to bottom between January 28, 2003 and February 11, 2003. See the daily gold chart for this timing window.
Gold in Summary
Caution! The action in gold has no doubt been very bullish. Gold is now extremely overbought and the weekly cycle low is due. When a market is trending strongly it can stay overbought or oversold for an extended period of time and that is what we have recently seen in gold. Once this weekly cycle corrects I will look to reposition for the long side. Also remember, the bulls need to see gold continue higher after the 5th month from the August low in order to remain bullish.
Tim W. Wood
Editor: Cycles News & Views
Contact: Cyclesman@jam.rr.com
Or 318-342-9038
Email this Article to a Friend 
Printer Friendly Version
