“The role of the dollar as base currency is a uniquely powerful level. It is one that is rarely thought of in terms of national security, but nothing is more important. If we lose it, we will have lost our position as the last superpower. Period.”
-Charles Duelfer, US intelligence
Gold saw one of the sharpest rallies of the year in December.
And yet few are paying attention.
A 4+ year basing pattern has lulled investors to sleep — not surprising with stocks in a bull market.
However, December saw a shift.
Stock momentum fizzled. And while there was little reason for money managers to show gold and miners on their books, they piled in with GLD leaving an outside up month in the process.
The December low was right on schedule according to our work — we flagged the Bear Trap bottoms in late 2015 and late 2016 and offered that despite another Bear Trap in December 2017 seemingly looking ‘too pat', the evidence for a low was there, based on a 6-7 month cycle.
GLD set a low in mid-December 2015 and a pivot high in early July 2016 followed by another low in December 2016.
7 months later, a pivot low played out in early July 2017.
Another 6 to 7 month turning point was due in December 2017. The sharp break into early December clearly didn't suggest a high.
The cycles aligned with the Bear Trap and gold responded.
From the trough on the week of December 11 at $117.40, GLD has rallied sharply to $124.08.
Follow-through this week will see the 3 Week Chart turn up. The last time the 3 Week Chart turned up was in July 2017, and GLD followed through to a September peak.
Following the explosive rally, GLD is challenging recent swing highs from October and November. While a pullback would not be surprising after a turn up in the 3 Week Chart this week (on trade above last week's high), the pain trade may be a grind higher with the market refusing to pull back right here, right now.
The key level to watch on gold to kick off 2018 looks like $1310-$1311.
$1310-$1311 is 90 degrees square January 2nd on the Square of 9 Wheel.
This week will be pivotal for gold.
So with a line-drive move to this time/price harmonic, it would not be surprising to see a pullback/consolidation.
The nature of that pullback will be important to observe.'
If gold knifes through $1311 and holds, the indication is for accelerated momentum.
Another 90 degrees up from $1311 ties to $1347 and the September high.
Gold may not take a breath until it challenges this prior swing high.
Just above the September swing high is the July 2016 swing high.
The bottom line is that continued momentum this week implies a test of prior swing highs before any kind of setback.
I don't think bulls or bears are positioned for this kind of move.
Both camps may be blindsided to the idea of immediate continuation in gold and miners as the bell rings in 2018.
It would be fittingly ironic if the late December high in Bitcoin proved to coincide with a new bull market in gold. While everyone has been talking about Bitcoin and could care less about gold, the metal just poked above $1300 to close out the year.
The potential is that a multi-year basing pattern is complete defined by the presumed Bear Trap (bullish) flagged in this space a month ago.
A breakout year in gold, even in a bear market, targets a 50% retrace which ties to $1450ish.
Conclusion. Short-term, miners did not really rally strongly on Friday in league with gold breaking above $1300.
GLD traced out 3 lower yearly lows for 2013, 2014 and 2015..
In 2016 the Yearly Swing Chart turned up with 2017 putting in an inside year.
The general rule of thumb for an inside period be it week month or year is that it typically resumes the trend of the preceding period.
Since 2016 was a reversal higher, 2018 has a strong likelihood of seeing a new advance.