At the beginning of 2002, this page was still titled "Gold BOTTOM Commentary". That changed in mid February 2002 when the title was changed to "Bottom Or Bull Market?". And finally on May 3, 2002 the title was changed to its present one "The Gold BULL MARKET This Week". We think this is a pretty good guide to the progress of Gold over the past year.
As we said last week: "Welcome to the first full year of the Gold bull market". Why "the first full year"? -when Gold hit a bottom in April 2001? Because Gold did not break through the $US 300 level decisively until late April 2002. As long as Gold had not done that, neither we nor anyone else could be confident that the Gold bottom was yet over.
Take a good look at this Gold Bottom chart. Note the red dotted line at $US 300. Don't forget, this $US 300 level was a FLOOR for Gold for EIGHTEEN YEARS - from late 1979 until late 1997. Once Gold broke below $US 300 in November 1997, it became a CEILING, and that ceiling was not decisively broken until late April 2002. $US 300 was ALWAYS the important resistance point. The $US 330 level - the top of the "Washington Agreement" spike in late 1999 - was important too, and it took Gold another seven months to break through it, but once $US 300 was breached, it was just a matter of time.
Having said this, technically, there has not been a reason to sell Gold since it began to rise from its April 2001 lows around the $US 255 level. Every high since then has been higher, every low has been higher. Right now, with spot future Gold closing at $US 354.90 on January 10, Gold is almost exactly $US 100 (or 39.2%) above that $US 255 level. Not a bad return for less than two years, especially when you look at what has been going on over the same period in most other investment markets.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 on March 27:
|
A cursory glance at these numbers, compiled since Gold did definitively break above $US 300, should make it crystal clear how important this breakthrough was. Which investment would YOU rather have held over the past ten months?
Here's another perspective - a comparison between Gold's 2002 low and its present price and the $US index 2002 high and its present "price". All data is on CLOSING levels:
|
As you can see, Gold has risen quite a bit more from its 2002 low than the $US index has fallen from its 2002 high. The $US index has now well and truly broken its post 1995 uptrend line. After a 1.21 point gain on the first trading day of 2003, the $US index has continued its inexorable fall.
Even with the comparatively magnificent performance of Gold vs other US investments over the past year, many "Gold bugs" are still gun shy, expecting Gold to turn turtle again. LOOK AT THE TREND. No market ever goes straight up. Down days are inevitable. But as long as the trend is intact, there is NO danger whatsoever. Gold is trending UP. US stock markets and the US Dollar are trending DOWN. These are PRIMARY trends (to quote the grand old man of US investment analysis, Richard Russell). What more do you need?