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Photocredit: © 2018 Bloomberg Finance LP

© 2018 Bloomberg Finance LP

Gold has had a good run, but it appears to be set up for a decline. This rally has had an effect on sentiment, turning bears into bulls. Judging by the opinion polls, when optimism was this high in the past, gold had a very high probability of being lower one to three months later. The rising bullion price has also affected trading. Hedgers are holding 40% of open interest net short, a condition that has led to losses over the next three months two-thirds of the time.

Price action adds to the evidence. On Friday, price popped through the $1345 resistance intraday but failed to hold the gain, closing at the low of the day, a swing of about $10. In fact, the gold price is at an overhead resistance level as the weekly and the monthly gold price cycles are topping together. This alone makes it quite doubtful that gold will break out to the upside. I add that the U.S. dollar cycle has bottomed.

The elements of a top are developing. Reduce gold holdings.

Chart 1: Gold at Resistance Levels

Gold is up against resistance.

Cycles Research Investments LLC

Chart 2: Gold Weekly Cycle

The weekly cycle is cresting.

Cycles Research Investments LLC

Chart 3: Gold Monthly Cycle

The monthly cycle is also topping.

Cycles Research Investments LLC

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