The 8-Year Cycle In Precious Metals
The 8-year cycle is the foundation of our cycle work. Gold prices form a major low approximately every 8-years. Further study reveals this cycle centers around a US Presidential election, either arriving slightly before or just after the November election. The earliest cycle we found bottomed August 25th, 1976, 70-days before the election. Though, the majority of these cycles typically bottomed in the 1st quarter of the following year. Historical measures suggested a bottoming period between August 2016 through March of 2017 for this 8-year cycle.
Gold prices made a low at $1,045.40 December 3rd, 2015. A full 11-months before the November 8th presidential election. Needless to say, we were not expecting it to arrive that early. It broke the cycle timing trend, and I reasoned that negative interest rates forced the cycle to bottom prematurely.
Technically speaking we are still within the timing window for an 8-year cycle low until April 1st, 2017. IF (big IF) the 8-year cycle forces are going to drag gold prices below $1,200 and into the fist quarter of next year they will do it here.
-QUARTERLY GOLD CHART- Each 8-year cycle breaks the cycle trendline to confirm the low. Prices rallied from the 2015 bottom to touch the trendline but are yet to decisively break it.
(Click on image to enlarge)
What we are watching: If gold tests $1,300-$1,315, corrects, and then sustains a breakout above $1,315, I can safely say we are in the clear. However, if gold prices can’t maintain a breakout above $1,315, then a move below $1,200 lasting into February/March 2017 becomes very real. That would subsequently become the 8-year cycle low or a secondary low depending on where it bottoms.
-GOLD DAILY CHART- Gold must sustain a breakout above the resistance zone to eliminate the potential for a secondary drop into the first quarter of 2017. I will buy the first common cycle low “1” anticipating a breakout above the resistance zone. I will sell my position if gold is unable to maintain its price momentum above $1,315.
(Click on image to enlarge)
Again, I’m not trying to frighten anyone. It’s merely a possibility that I will be monitoring during the month of November. I plan to take partial positions during the next pullback in gold.
That rarest of things... level headed gold analysis. Thank you for the calm perspective on gold. As a fundamental aside, gold will only be ready for prime time (relative to most other assets) if the stock market continues to weaken. But that is not at all a given unless SPX breaks the June lows.
Fascinating, does #gold ever deviate from this cycle? Wouldn't there always be unforeseen variables that could affect these cycles?
Hi Cynthia,
No- I haven't noticed much deviation. Sometimes the cycle arrives before the election but more often than not just after. However, this cycle may have terminated early because of negative interest rates in Japan, Germany, Switzerland, etc. The month of November is key: If gold prices are unable to sustain a move above $1,315, then we risk rolling over and dropping into the standard 8-year post-election timing window.