Gold in early stages of secular bull cycle

SINCE the start of 2017, gold has been moving perfectly in an uptrend manner as it formed a series of higher highs (HH) and higher lows (HL), which is the textbook definition of an uptrend. This immediate uptrend is moving in line with our expectations of gold forming a cyclical bottom back in December 2015 at US$1,046, and it is currently in the early stages of a secular bull cycle. Our cycle analysis has US$1,920 as the target for the current secular bull market.

More recently in August 2017, gold finally broke above the crucial US$1,300 psychological resistance area thereby forming another HH point within the uptrend. However, as the escalation from North Korea simmered down with the absence of missile tests, gold sold off and entered into a period of correction.

Gold began correcting off the US$1,352 resistance area since Sept 8, 2017, but a reversal back to the uptrend might be happening now. There is a confluence of support off the 200-day moving average, US$1,264 support area and a combination of 38.2 per cent and 61.8 per cent Fibonacci retracement levels that seem to be keeping a floor on price. After dipping marginally below that support area on Oct 6, 2017, buyers came in aggressively to hold the price up and succeeded in closing at the high of the day. As a result, a hammer was formed suggesting a reversal higher. If the hammer holds, the next higher low point within the uptrend will be established at US$1,260. A hammer is a bullish candlestick pattern that signals a capitulation by sellers to form a bottom to indicate a potential reversal to the upside.