There was another Gold "scare" this week. This time, it was announced on February 27 that a European Central Bank had sold 30 Tonnes (964,500 troy oz) of Gold. Bang! Gold fell $US 7.80 in New York trading to once again fall below the $US 350 level. The fact that the sale (by Portugal) had taken place during the previous week and that it was entirely in accordance with Europe's "Washington Agreement" implemented in 1999 was not deemed relevant.
On the following day, the last day of February, spot future Gold got a bit more than half of its fall on the previous day back. Spot future Gold closed this week (on Feb. 28) at $US 350.30 - up $US 4.10 on the day and down $US 1.50 on the week.
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:
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Two weeks ago on February 14, the $US index closed at 100.25. It closed at exactly the same level on February 21. And on February 28, the $US index closed at 99.81. As you can see, the Dollar is "on hold", aided and abetted by frantic Japanese buying to try to keep the Yen down and thereby preserve their ability to export. You can see on the table above that the percentage rise on Gold since the metal first broke through $US 300 to stay and the percentage fall of the $US index over the same period are now almost identical.
On the daily bar chart, you can see that support is firming in the mid $US 340's. Gold has now bounced off those levels twice in the past two weeks. On the weekly bar chart, the shorter-term (20 week) MA is providing support. On the point and figure chart, Gold is now in a tight trading range right at the halfway point in its upchannel - the one that it broke through the top of at the beginning of the month.
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:
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You will find charts of the $US index and Gold here for comparison.
If there was ever going to be a time when all efforts were bent to keeping the Gold price under control, it was always going to be on the brink of the war with Iraq breaking out. We are now very close to that brink, and as the charts on this page show, Gold is back firmly under control. So are US government bond rates and so is the Dollar. For now.
The question is, how long can this control last? It is by now obvious that most of the rest of the world has decided NOT to do what they did in the first Gulf War or in Mr Clinton's Balkans war of 1999. This time, the US is facing ever stronger headwinds in "getting its way" both inside and outside the UN. The Administration is also facing increasing unrest and protest inside the US itself.
The one "ominous" chart pattern on the charts this week is the possibility of the development of a "head and shoulders" formation on the point and figure chart. If this does in fact occur, it will only do so if Gold breaks below its recent support between $US 344-46. There is a possibility that a concerted push will be made to bring about such a price fall to coincide with the onset of the Iraq war.
If it does happen, first support on the $US 1 x 3 point and figure chart is at about $US 336. Below that is the major trendline which stretches back to Gold's lows in April 2001. That line, the fainter green line on the chart, is presently slightly below the $US 320 level. Gold could go all the way back there WITHOUT violating its uptrend and therefore its $US bull market.
Could it happen? Certainly, desperate times call for desperate measures. Will it happen? We can't know for certain, but we do know that it will only happen if the rest of the world decides not to oppose the Gold selloff. With the rest of the world opposing just about everything else the US is now doing, we see that as a low probability.