The question now remains whether gold is stuck in a
D-wave decline or whether the action since December has just been a very
tricky midpoint consolidation before the C-wave finishes its run.
I will say the recent strength despite a strong dollar
is very encouraging.
There are four important requirements that have to be
met before we can say with a high degree of confidence that the C-wave is still
First, the single most important is the dollar. We
simply must see the intermediate dollar cycle top. No C-wave has been able to
fight a rising dollar. What Iíll be looking for is a weekly swing high on the
dollar chart as a sign the intermediate cycle has topped.
I will note the dollar is getting late enough in the cycle that it could put in
a top at any time. Not to mention we are starting to see a large momentum
Second, the next requirement is for gold to put in a
right translated daily cycle. If this remains a D-wave decline then all daily
cycles should be left translated. If gold can eclipse $1131 this week then we
will have a right translated cycle and the second requirement will have been
successfully met. With todayís close above $1133, this key requirement is
Third, the next hurdle for gold is the $1161 level
which has to be surpassed. Gold has to break the pattern of lower highs and
lower lows. It will do that if gold can top $1161.
The $1161 price level will also eliminate the December
trough as the intermediate cycle low. Instead, the most recent intermediate
cycle low would become February.
This is very important as it would mean gold is on
week 4 of the intermediate cycle (which typically runs about 20 weeks) instead
of week 10. In effect, this puts 6 more weeks on the shot-clock for the second
leg of the C-wave to progress.
Fourth and finally, we need the miners to start
participating. If the HUI can cut through the 420 resistance level that will be
a big step in the right direction. With the HUI close today above 420, this key
requirement as also been met.
If miners can break out to new highs later this month
all resistance in the gold market will be out of the way and the path will be
clear for the second leg of the C-wave to rack up another monster move.
The Smart Money Tracker
Gary Savage is currently retired and lives in Las Vegas. He
is the author of the Smart Money Tracker, a financial blog with
special emphasis on the gold secular bull market.