GCM16 – June Gold (Last:1282.90)

In the tout below this one, I’ve raised a strong cautionary note in GDX, an ETF fund with a portfolio comprising some of the biggest gold miners. On Wednesday, GDX generated a very bearish ‘three black crows’ candlestick formation on the daily chart. Although there is nothing so ominous at the moment in June Gold’s chart, its failure on Monday to exceed a key high I’d flagged at 1309.00 recorded in January 2015 is incipiently bearish. I’ve referred to the peak in my forecasts as ‘the Matterhorn,’ noting that the prospect of a long and robust precious-metals bull market would brighten considerably with a move above that high.  So far, however, the futures have shown reticence, if not to say chicken-heartedness, in approaching the peak, especially considering the running start they got from a nearly vertical approach.

Because the June contract failed on the first try to get past 1309.00, that will weigh on any bull market might unfold from this point forward. Thus, if the futures were to fall into a steep decline a year or two (or three) down the road without having surpassed the old record high just above $1900, I’d be tempted to infer that the bull market’s failure had been foreshadowed by this week’s failure to breach 1309 on the first attempt.

To be sure, gold’s spectacular run-up from mid-January to mid-February deserves a rest, and it is therefore unsurprising that this ostensible C-D follow-through leg has failed to replicate the steep ascent of the A-B impulse leg. Looking ahead, however, we will need to temper our bullishness at least somewhat if June Gold now falls beneath 1192.10. That’s a key low in the 11-week-old consolidation begun in February, and its breach would create a bearish impulse leg on the daily chart. Although its power would need to be weighed against that of the Jan-Feb impulse leg, my current judgment is that bears would hold a slight edge in the ‘duel’ at that point.  This would not necessarily doom hopes of a bull market, but it would raise the odds of a correction down to the at least 1100-1150.