Looking at the big picture for spot gold, we see that the next cycle low is due in about four weeks. In other words, the current cycle that started at the end of December is about 85% complete.
That means that the strength off of yesterday's low at $1526.98 not only represents a deep retest of the December 29 low at $1522.48, but it likely also satisfies the first coordinate in the next cycle bottoming period for gold and the SPDR Gold Shares (GLD) ahead of a new upleg in its larger overriding bull market.
As long as the $1527/22 support zone remains intact as a viable and critical support plateau, my work indicates that I should view all of the action off of the September 6, 2011 high at $1921.50 as a completed intermediate-term correction ahead of the resumption of the longer-term bull trend.
That said, to trigger initial signals that a significant low has been established, spot gold must hurdle and sustain above $1590-$1602.
If something extraordinary unfolds that sends global equity flows into the last or only perceived safe haven market -- gold -- then perhaps we have to throw the cycle timing work, and any other "normal circumstance," out of the window while gold potentially explodes towards new high territory in a hurry.
Mike Paulenoff is the author of MPTrader.com, a real-time diary of his trade alerts and technical analysis on sectors and their leading component stocks.
Of course, such a situation is definitely an outlier.
No positions in stocks mentioned.
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