Gold Continues to Hold at All-time High

by Erik McCurdy

Gold closed slightly higher this week, holding at all-time highs of the secular bull market from 2001. We are 8 weeks into the intermediate-term cycle from late January and the long-term uptrend remains at a potentially important inflection point.

In order for the long-term uptrend to remain healthy, the current intermediate-term cycle must break out to a new all-time high, thereby reconfirming the bullish bias established by the previous several cycles. A failure to break out followed by a return to the latest ITCL would raise the possibility of a cycle translation shift from right to left and suggest the development of a substantial correction of prolonged period of consolidation. Additionally, the latest Annual Cycle Low (ACL) likely occurred in January, so a return to the January low would increase the likelihood of an annual cycle translation change from right to left and further support the correction scenario.

For the moment, the long-term uptrend on the weekly chart remains relatively healthy, supporting a continuation of the advance. However, the slight negative divergence that has developed between the Gold Currency Index (GCI) and gold in US dollar terms remains in place.

The GCI has been unable to return to the December all-time high and weekly momentum has been trending lower since July 2010, suggesting that the long-term uptrend has weakened. The divergence remains slight, but it is a potential warning sign that we will continue to monitor closely. Gold market behavior during the next few weeks should provide renewed clarity, with a confirmed breakout forecasting additional long-term gains and a return to recent lows suggesting the development of a more substantial correction.

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Erik McCurdy is the senior market technician for Prometheus Market Insight and has been analyzing charts every day for over 15 years. The software program that he developed to monitor long-term stock market trends has correctly predicted over 90% of the long-term turning points in the S&P 500 index since 1940. His Gold Currency Index has predicted every major trend change in the US gold market since its creation in 2005. The Prometheus Market Insight newsletter service provides daily, weekly and monthly forecasts for stocks, bonds, currencies, commodities and precious metals using proven computer models that base their predictions on technical and cycle analysis.  Stay in touch:    Email: [email protected]