Gold Market Oversold Reaction Continues

April 28th, 2013
in gold, syndication

by Erik McCurdy, Prometheus Market Insight

As expected, the recent two-session crash in the gold market has been followed by a violent oversold reaction. Following the 13 percent decline in mid-April, gold has rebounded more than eight percent during the last eight sessions.

Follow up:

Click to enlarge

With respect to short-term cycle analysis, the strong advance today has caused a change to our preferred scenario and it is now likely that the beta phase rally is in progress. Additionally, the move well above the last alpha high (AH) during the beta phase rally signals the likely transition to a bullish translation.

Click to enlarge

As we noted two weeks ago, technical and cycle analyses produce reliable outlooks when price movements are well behaved, but abrupt crashes like the recent decline severely limit the usefulness of these techniques. Therefore, short-term forecasting will remain difficult until the market stabilizes and we will need to wait for renewed clarity to emerge from subsequent price behavior.

From an intermediate-term perspective, the breakdown of the consolidation formation that had been developing since 2011 was followed by a quick return to the next meaningful support level in the 1,400 area. The strong rebound this week suggests that the 1,400 level will hold during this initial test, but it is likely that the violent price behavior of the past three weeks will continue in May.

Click to enlarge

A weekly close above 1,481 tomorrow would generate a cycle low signal on the weekly chart, indicating that the half cycle low (HCL) of the intermediate-term cycle from March likely formed last week.

Click to enlarge

Extreme moves often result in cycle compression, so the formation of a very brief cycle from March would not be unusual following the recent crash. However, the recent breakdown of the long-term consolidation formation was a significant bearish signal and it is too soon to know if a meaningful intermediate-term low occurred last week. Therefore, it will be important to monitor price behavior closely heading into the forthcoming ITCL for the next assessment of gold market health.


Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

 navigate econintersect .com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved