Last week (January 27-31) was actually a "down week", during which Gold fell $US 0.10. This week, despite all the excitement and subsequent disappiontment, has actually been an "up week" during which spot future Gold rose $US 1.60. Nine of the past ten weeks have therefore been "up weeks".
Of course, Gold was a lot higher mid week than its close at the end of the week. The excitement peaked just before Mr Powell's UN speech on February 5 when Gold skyrocketed to $US 390 in Asian trading after having closed at a new 2003 high of $US 379 on the previous day in New York. Gold closed on February 5 in New York at $US 376.40, fell to $US 370 in Access trading after the Comex closed, and has ended the week on February 7 at $US 369.90.
Before all the "blame" for this Gold "correction" is laid at the feet of Mr Powell, let's see what we had to say here last week:
"As you can see on both the daily bar chart and the point and figure chart to the left on this page, Gold has spent the week trading all around the $US 370 level. To see why this $US 370 level is proving a resistance point, check out these two charts:
The long-term $US 5 x 3 point and figure chart
The $US 2 x 3 point and figure chart
(The Gold Bull Market - January 31)
You can see that Gold has breached its major downtrend line on the $US 5x3 point and figure chart (it would turn down on a close of $US 360 or less) and has turned just above the top of its upchannel on the $US 2x3 Gold chart. This is where we expected resistance, this is where we have got it.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 to stay on March 27, 2002:
|
Between late March and late November 2002, Gold rose a mere 4.83%. Between the end of November 2002 and February 4, 2003, Gold had risen 19.6%. That's a HUGE acceleration. Gold was due for a correction. We now have the first signs that we are going to get one.
The $US Index dipped back below 100 this week, setting a multi-year low of 99.29 on February 4 and closing the week at 99.77. The Treasury's "debt to the penny" hit $US 6.401 Trillion on the last day of December 2002 AND the last day of January 2003 (which is in itself a neat trick). And on February 6, 2003, it was reported at - you guessed it - $US 6.401 Trillion. By the way, the Treasury's debt ceiling is $US 6.400 Trillion. Treasury Secretary Snow has discreetly informed the Congress that the ceiling will HAVE TO be raised THIS MONTH. They had better raise it a LOT. Mr Bush's budget has NOT ONE PENNY included in it to reflect the cost of a war in Iraq.
Back to Gold. 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:
|
You will find charts of the $US index and Gold here for comparison.
"Given the fact that Gold has been going straight up for two months, and given the fact that it has reached resistance points on some major long term charts (see above), we would not be surprised in the slightest to see a correction in the next week or two."
(The Gold Bull Market - January 31)
BINGO! In the leadup to the 1991 Gulf War, Gold gyrated all over the place but didn't take a BIG correction until the first day of the air war - January 17, 1991. This time, of course, Gold has been accelerating in one direction, upward. Now, for the first time since November, we have a correction.
The financial powers that be are hoping against hope that the memory of what "happened" to Gold at the start of Bush Senior's Iraq war will scare investors away from Gold in the leadup to Bush Junior's Iraq war. Whether there was "manipulation" or not as Mr Powell got up to address the UN on February 5, Gold was "due" to correct.
Corrections are ever present healthy features of any bull market. And the Gold bull market is very healthy indeed. As you undoubtedly know, in any PRIMARY bull market, corrections are buying opportunities.