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In a surprising departure from its normal character, the Gold market has recently been subdued, with little volatility. Even though its Cycle timing is uncertain, Gold should be more volatile than what we’re seeing at present. It’s as if Gold is being ignored, as if the world has finally given up on it. After 4 long years of grinding lower it’s become an afterthought.
That sort of behavior is not bullish for Gold – it wouldn’t be for any asset. Speculative forces drive price in the short term, and an out-of-favor asset like Gold generally won’t pick up much speculative buying. That said, for any asset locked in a cyclical bear market, Gold’s level of apathy is natural part of the Cycle. The speculators left Gold years ago, so there is no real buying behind even the temporary, counter-trend rallies in each new IC.
And even many of the “true” Gold-bugs appear to have given up. During the past 18 months, they have sold the “monster silver boxes” they bought to get them through the hyper-inflation event they believed was just around the corner. Understand, I’m not mocking Gold-bugs. To the contrary, I personally hold a decent amount of physical metal, but my holding it is not contingent upon price, and will not be sold under any circumstances. It’s insurance.
The current apathy toward Gold illustrates that it’s finally moving beyond the bear market bottoming process (the despair stage) and into silent accumulation (the stealth phase). Technically and from a price perspective, this stage is always difficult to see. But from my vantage point, with the luxury of access to the thinking of many investors from varying walks of life, I believe we’ve already arrived at that next phase.
Shorter term, it remains anybody’s guess as to where Gold will go, and don’t be fooled into thinking otherwise. There is, however, a bearish bias to Gold’s current Daily Cycle and chart (below), due primarily to Gold’s inability to punch higher and form a trend of higher Cycle highs. A move below $1,167 would continue Gold’s series of lower lows, and would be a real warning about its near term intentions. At present, it’s really the bulls that need to prove themselves.
The Investor Cycle is also difficult to read. What is especially strange about the current IC is that the first 7 weeks have yet to show any real upside action. ICs, even those during bear markets, always manage a significant upside spike in the first 5 to 7 weeks. But the current IC has seen only tepid upside and, to be honest, I’m not sure what to make of it. Gold generally conforms well to Cycle patterns, so I typically have a fairly good read on it. But its current behavior is different than in the past, and it doesn’t provide a straightforward read. (more…)