What’s Next For Gold?

September 23, 2014

The gold market has been disappointing to say the least. 

It’s been on the decline for several months now and many investors are throwing in the towel.  Those who aren’t are wondering, how low could it go?

All factors considered, we believe 2014 will end up being a major bottom year, or part of a major bottom formation for gold.  And Chart 1A provides a good example of this.  

gold price forecast

The Big Picture

It shows gold since 1969, just prior to the onset of the first major bull market. There are two main interesting things on this chart.

Many have talked about the similarities of gold’s bull market since 2001 compared to the major rise of the 1970s. There is merit here and it’s worth mentioning. 

If the similarities repeat, then today’s gold market is like the 1976 time period. It’s when gold formed a bottom and a springboard for the next leg up in the great bull market.

If the current action is similar, we could see gold take off like we showed you last month.  This could result in a strong bull market that would take gold to much higher levels.

The leading indicator (B) is also signaling a bottom.  Note that it’s rising from a bombed out level.  This is very bullish and it’s telling us that gold’s downside is limited, and the upside is open.

A Closer View

Despite the positive big picture outlook, there’s no question that damage has been done.  Gold and silver broke supports last week.  These were key levels, indicating there’s more weakness to come.

gold price timingThat being the case, we wanted to review where gold stands.  So here’s what we’re watching…

The big picture is always good to keep in mind.  But today’s reality is what’s important for this month and this year.

This is why Chart 2 is our favorite timing tool for gold. 

The A through D intermediate moves provide a good picture of gold’s intermediate ups and downs, which we’ve relabeled after going back to the drawing board.

The bottom line is this:

A ‘D’ low clearly took place in mid-2013.  That was followed by an ‘A’ rise. 

We now believe the decline in late December was a ‘B’ low.  This was followed by a weak ‘C’ rise in March 2014.  That is, the year started out strong but gold petered out.

A ‘D’ decline began after the March peak.  And based on the latest weak price action, gold is signaling the ‘D’ decline is still underway.

This means we’ll likely see the December lows tested before this ‘D’ decline ends. If so, that would be okay.  As you can see, it would still be part of the bottoming process that’s been in force since mid-2013.

But IF this ‘D’ decline clearly closes below this low at $1193, then it would be a very bearish sign. 

So, the December lows are currently the key to the whole bottoming process.

Visit the Aden Forecast website: www.adenforecast.com

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Mary Anne & Pamela Aden are well known analysts and editors of The Aden Forecast, a market newsletter named 2010 Letter of the Year by MarketWatch, which provides specific forecasts and recommendations on gold, stocks, interest rates and the other major markets. For more information, go to www.adenforecast.com

The periodic symbol for gold is AU which come from the Latin for gold aurum.

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