The running theme in gold markets last year was for price to keep finding ways to move lower than most traders thought it could. We and our subscribers were able to trade that market successfully on the short side, because we relied on these five elements of analysis:

1) We always had at least two scenarios in mind which would produce different outcomes (e.g., bullish vs. bearish, or bearish vs. less bearish, etc.)

2) We clearly delineated the boundaries for price to obey, to be in keeping with each scenario.

3) We used trader sentiment to favor scenarios that were the most contrarian (while not becoming fixated on those scenarios).

4) We paid attention to some technical analysis methods that are seldom used, but that have proved to be predictive over time - methods that include cycle analysis, momentum studies, Gann techniques, Elliott Wave, and more.

5) We always looked for trade entries that favored our dominant scenario, at the times when price was near the edge of what that scenario would tolerate.

Elsewhere, we have compiled a retrospective of how our analysis tracked gold throughout 2013. We think it can be useful reading for the trader, because it shows how to see entry opportunities and, in particular, how to see them on the kinds of charts we publish.

Now, with January's price low, the technical picture for gold includes some mixed signals. This period can be thought of as a crossroads, and we should find out soon which of the technical signals will set the tone for the first quarter of 2014. (Our primary scenario still favors lower lows over the next few months.)

If gold bounces from here...

Supporting the bullish case, gold is making what looks like a double bottom, which has arrived with positive momentum divergence on the monthly and weekly timeframes. Also, the market's empirical cycle on the weekly timeframe has reached the point where it should begin favoring upward moves, and that upward tendency will last throughout 2014. In addition, sentiment among large speculators has reached a low that's in the same vicinity as the one that preceded gold's summer 2013 price bounce.

This line of thought suggests two possibilities - a medium-term bullish outcome, or an outcome that is short-term bullish but medium-term bearish. We describe those scenarios in this section, although our preferred option is presented in the next section.

The medium-term bullish scenario would have last summer's low be the end of the downward leg that began in 2011. Note, even this option is bearish into approximately 2016-2017, but it allows for a substantial (c)-wave rally for at least several months. Such a rally would probably take price above $1,400 and possibly to the $1,591 area. This outcome would cast this year's lows as a double bottom.

The short-term bullish, medium-term bearish scenario pays attention to some of the same technical signals, while painting an impending rally as just the final stage of a 4th-wave corrective pause before price continues downward. This scenario allows for a bounce during the first few months of 2014, but the upper channel boundary shown on the chart below would act as resistance. That could happen in the vicinity of $1,350, depending on how long a bounce takes to intersect the channel line.

Both of the scenarios described above would allow long-term Elliott Wave analysts to view this year's low as the completion of a large 4th wave that began in 2011 - a view that will be attractive to some, but that we believe is incorrect. A bounce from the present area would give hope to long-term gold bulls, only to set up an arena in which those hopes would eventually be dashed.

If gold does not bounce from here...

The bounce scenarios described above are attractive for a number of reasons, but our primary scenario continues to be that gold will see lower lows during the first quarter of 2014. In part, this is because it is the most contrarian of all three scenarios. A move downward in coming weeks would disappoint those looking for a double bottom, and it would surprise the first wave of contrarian traders who see the present the low in speculator sentiment as an omen of an impending bounce.

In addition, we believe one of the marks of a lasting low will be when price tests below the $1,103 level of the 2008 high - a level that invalidates the decline from 2014 as a large fourth wave.

However, in our approach, even the most attractive scenario must be grounded in a valid Elliott framework. The case for a low into early 2014 treats the whole move down from 2011 as simply the first part of a much longer A-B-C corrective move that could last through much of the decade.

A detailed examination of the weekly chart and price targets in keeping with our preferred scenario can be found in an extended version of this article on our website.

Note, if price rises much beyond 1,267 or beyond the upper boundary of the big channel, then we would assign this scenario a lower probability and would start to trade along the lines suggested by one of the charts shown earlier in this article.