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  Gold Cycles And The Fed: Is A Major Low On The Horizon?
 
  2017-12-11
 

 

Summary

I introduce a simple time-cycle analysis which has relevance to the historical value of GLD.

The raising of interest rates by the Fed corresponds to some of the time cycles.

I believe it is possible that another major low is on the horizon for GLD.

This idea was discussed in more depth with members of my private investing community, Commodity Conquest.

Next week, on Dec. 13, the Federal Reserve is expected to raise the inter-bank lending rate by 0.25%. The last four interest rate increases were followed by significant moves in the value of the SPDR Gold Trust (GLD). Three of the four times, gold prices rose significantly, and one time, prices fell before pivoting sharply higher. Last June, I published an article that outlined my expectation that gold prices would fall following the June 2017 rate hike, which at the time was a minority view in the gold community.

Gold Cycles

Since the major low in gold, which formed in late 2015, gold has found significant bottoms that correspond to the intersection of two time cycles. I created these time cycles by trial and error. I have highlighted the intersection of the time cycles with a green circle. Each of the four recent time cycle intersections has been coincident with a major low in the price of gold. And three of the four cycle intersections are near in time to recent rate increases by the Federal Reserve.

Here are some notes on the time cycle intersections and the value of GLD.

  1. In December 2015, a major price pivot occurred one week prior to the time cycle intersection and the Federal Reserve raising interest rates.
  2. In June 2016, a major price pivot happened three weeks prior to the time cycle intersection. Interestingly, the Brexit vote coincided with the time cycles.
  3. In December 2016, a major price pivot occurred one week after the time cycle intersection. The Fed rate increase was on the same day as the time cycle.
  4. In June 2017, the Fed rate increase was within a day of the time cycle, and the major pivot happened four weeks later.
 

Will GLD Put In A Major Low Soon?

I believe that it is indeed possible for GLD to form a major low in the next several weeks. I won't place all of my eggs in this time cycle analysis; however, nor will I go long just on the basis of the upcoming Federal Reserve meeting. On the other hand, I do see many "stars aligning" for an upcoming major low in gold and GLD. I intend to let other investors pick the bottom and ideally go long on a technical back-test after the bottom forms.

One possible scenario for GLD is shown on the weekly chart below. It will be very favorable for long-term gold bulls if price finds support near $115 and rebounds sharply higher from there.

Commodity Conquest

This article is similar to information that I post daily and weekly in my subscription service. If you are interested in research like this, you might consider Commodity Conquest. In addition to coverage of gold, silver, and crude oil, I also conduct in-depth coverage of many energy and commodity firms. Here is a sample of my stock picks since June 2017.

Disclaimer: This article was written for information purposes, and is not a recommendation to buy or sell any securities. I never intend to give personal financial advice in this newsletter. All my articles are subject to the disclaimer found here.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

 

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

 
 
 
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