Gold and Silver May Be Ready
for Decline to Longer-Term Cycle Lows

By Raymond Merriman
M.M.A. Cycles Report

        This now starts the 14th week of the 15-21 week primary cycle in December Gold, following the 1172 low of May 21. Gold took out that low as it made an 8-10 week half-primary cycle trough on July 28 at 1159.30. Typical of two-phase patterns, the ensuing rally has lasted more than 3-8 days, and recovered more than normal 38-62% retracement off that low. The high of this second half primary cycle has so far been 1239.50, realized on Thursday, August 19. That is three weeks from the low and into the current critical reversal date (Aug 21 +/- 3 trading days), so it may be the half-primary cycle crest. The price target for that crest was 1209.40-1253.90. Anything higher means we have to look at the low of July 28 as a distorted primary cycle, probably a big expansion off the prior primary bottom of February 5. For now, we look at this as the end of the half-primary cycle rally, and the start of the next leg down to the primary cycle trough, due in 2-5 weeks, and probably below the 1159 level of the half-primary cycle trough. The price target is 1128.50 +/- 16.70, but it be much lower if the 4.25-year cycle is going unfold as a two-phase pattern. If that is the case, then the half-cycle of this longer-term trough is due December 2010, +/- 5 months, at a price target of 977 +/- 70. We note on the weekly chart an extension of a former downward trend line that comes in around 960. I don't expect any decline to break that low. However I do expect an upward primary trendline that comes in around 1170-1175 this week in the December contract will soon break. And if that breaks, it means a longer-term cycle has topped out. Traders must also keep in mind that even if it breaks that trendline, the decline might not be straight down. Mars will enter Scorpio September 14-October 28, and a 2-4 week strong rally usually occurs during that time frame. This fits, for a primary cycle trough is due in 1-7 weeks. Once that trough is in, a minimum 2-5 week rally would commence to the crest of the next primary cycle, and that could very well be during Mars in Scorpio. For now, traders are advised to sell short with a stop-loss on a close above 1254. But then look to cover and reverse to the long side on a 2-5 week decline to the primary cycle trough.
        The primary cycle labeling for Silver is complex. This starts either the 11th week of the 13-21 week primary cycle off the 1733 low of June 7, or the 16th week off the 1717 low of May 5. I am going to go with the 11th week. In this labeling, August 23 also starts the 4th week of the second 7-11 week half-primary cycle. A primary cycle trough is thus due in 3-7 weeks. Since it is in the later half of the primary cycle by either labeling, my bias is more bearish. It is also more bearish because of a rapidly approaching longer-term cycle. As stated previously, "A break below the recent double bottom at 1715 (May 5) and 1723 (June 7) would turn the primary cycle bearish. It could be even more ominous...it could be the start of a decline into the 111-week cycle trough, due within 19 weeks of December 17, 2010. If that is the case, the downside price target could be as low as 1362 +/- 124. In fact, the decline could be down to the 1000 mark, as it could also coincide with the 4.34-, 9-, and 18-year cycles that are due." There are a couple of geocosmic factors to point out with Silver too. Venus is in Libra August 6-September 8. This has a high correlation to primary cycle troughs in Silver. Mars will enter Scorpio September 14-October 28, and as with Gold, this tends to correspond to rallies of 2-4 weeks. Thus it is possible that Silver makes its primary cycle trough as early as the next two weeks, or perhaps it extends into the September 21 critical reversal zone. A normal downside price target for this bottom would be 1660 +/- 35 in the December contract. But as suggested before, the longer-term 111-week cycle low is coming up, and hence the decline could be more serious. Traders may now remain short with a stop-loss above 1870 in December, but look to cover and reverse to the long side on a drop below 1700 if offered September 7-24.
        Editor's Note: Raymond Merriman is editor of M.M.A. Cycles Report, P.O. Box 250012, West Bloomfield, MI 48325, 1 year, 12 issues, $295. Weekly email updates and recommendations: $1,500/year. www.mmacycles.com.