" ...the charts on this page are telling us that the $US Gold price is not going to remain quiescent much longer. There simply isn't any room left for it to go "sidways" any further."
(Gold Bottom Commentary - April 12)
There wasn't - and it didn't. This week, Gold has risen $US 4.70, with the big $US 4.00 rise coming on April 19, the day after the surprise Fed rate cut, as the $US fell precipitously and the yields on the long end of the Treasury curve blew out even further. All is decidedly NOT well in "paper land". Mr Greenspan obviously doesn't like what he sees coming at him in the U.S. economy and has decided to jump out of the trenches and lead a full-scale monetary assault. Apart from the stock markets, a normal bear market rally, so far - not so good.
Gold has certainly not yet come back to life, but it is now lying there with at least one eye open. Consider the charts on the left. All three of them show "buy signals" for anyone prepared to be aggressive. We have a moving average crossover on the daily bar chart. The weekly bar chart shows a double bottom and the price has regained its shorter-term MA. And the P&F chart, after establishing what is for all intents and purposes a double bottom of its own, has broken out of the tight range which has confined it since the middle of last year. Last week there was little downside risk. This week there is even less downside risk, and the first indicators that there may be some upside reward waiting in the wings.
Another indicator to consider is Gold lease rates. These continue to fall, but it is hardly surprising this week in light of the Fed's 0.50% rate cut on April 18. Unless one is prepared to buy long-term Treasury paper, the "carry trade" between Gold and U.S. debt paper is getting less attractive by the day. And so, to non-Americans, is the prospect of having their assets denominated in U.S. Dollars. Rates are down and the Dollar is falling too. Take a look at the Gold/$US Index comparison page. There's no question that the $US Gold chart looks a lot more enticing than the $US Index chart at present.
Finally, if you haven't already done so, take a look at the Weekly bar chart back to 1996. Note the price action since the "Washington Agreement" spike in late 1999. You will see that each high is lower than the preceeding high and each high lower than the preceeding low. Until THIS TIME.
This time, the chart formed a DOUBLE BOTTOM, the low did not go lower than the previous low. Now, what we are waiting for is a high that goes HIGHER than the previous high. That previous high (spot future closing basis) was $US 272.30, set on March 12, 2001. Any close ABOVE that level would be a SOLID indicator that the trend is turning - UP.
On the downside, there is SOLID support at the recent double bottom just below $US 256 and below that, the 1999 low at $US 253. Gold is "safe" at any price above $US 250. On the upside, we have no difinitive BUY SIGNAL yet, but the positive technical indicators are proliferating nicely.
"Is this the 'calm before the storm'? We think it is. At the very least, the longer this inactivity goes on, the clearer it becomes that there is next to NO downside risk on owning physical Gold."
(Gold Bottom Commentary - April 12)
As any experienced investor will tell you, the BEST time to get established in ANY investment is during the calm before the storm. The only mistake you can make is to hold on after you have been proven wrong. Any Gold price below $US 250 would prove us wrong. That's not a big risk to take, especially in light of the state of the paper investment markets right now.