Gold futures update for week of March 24
Cliff Droke
The story of the past month in the gold market has been the complete dominance of the falling 40-week cycle, the dominant interim cycle in the gold futures market, which as I pointed out last week is scheduled to end in late March/early April.
In last week's report the parabolic bowl in the gold daily chart was highlighted which allowed for a drop down to around $325 in the event that gold was unable to find support above $330.
On Friday, March 21, the April gold contract declined to precisely this level but closed the session on its low for the day, a sign of continuing weakness. This means that gold will be under immediate pressure entering the week of March 24. So does this mean that gold has seen its low for this cycle? Unfortunately, gold probably has not seen its low as the latest parabolic structures in the gold chart show (below).
As you can see from the above chart, the current parabolic bowl in the daily gold chart doesn't bottom until around the $320 area, which means we'll likely see a visit to this level in coming days. Also, the parabolic dome (which is a composite of the final part of the 40-week cycle) still holds rule over gold prices for now and probably won't be tested until late in the week.
Another factor worth pointing out, one that I forgot to mention last week, is that gold's dominant 2003 uptrend line has been broken as can be seen in the above chart. Dominant yearly trendlines are measures at the beginning of each new year between December and January, in whichever month the dominant low (or high, as the case may be) is made. In the gold market we see that a dominant low was made in early December, at which point the 2003 trendline technically began. It was broken a few days ago, which means that the trend is no longer technically up for gold.
Granted, the overall long-term trend might still be up but the dominant short-term trend is not. This means that in coming weeks gold will be "under the gun" so to speak and will now be forced to prove its merit to potential investors as it no longer has upside momentum and a short-term uptrend in its favor. This means that heavy upside volume will be required to rescue the metal from further weakness and propel it to greater heights.
If the $320 area fails (i.e., the parabolic bowl) fails to contain the gold price slide then it's anyone's guess where gold will find its low. Obviously, a trip down to $310 would likely be next and maybe even a test of the major $300 benchmark. All eyes should be on $320 this coming week.
March 24, 2003
Clif Droke is the editor of the weekly Bear Market Report, a combined forecast and analysis of U.S. stocks and indices and international precious metals stocks, and is the author of numerous books on finance and investing, including most recently "Gold Stock Trader's Almanac 2003." Visit his web site for free samples of his analysis at www.clifdroke.com
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