The war is on. Shock and awe has gone in - twice. And Gold has fallen all the way down to $US 326.10. The last $US 6.90 of this fall came in New York after the London market had closed for the weekend and it came in perfect unison with the first wave of the "shock and awe" strikes going in on Baghdad. And, to the shock, awe, and discomfiture to most Gold technical analysis, the fall on March 21 pushed Gold below its 200 day moving average (MA).
You can see this penetration of the 200 day (40 week) MA on the weekly bar chart to the left, and on longer-term weekly bar chart (chart opens in separate window)
You can see that this MA has not been penetrated since late 2001, very early in Gold's bull market. You can also see, however, that Gold's bull market remains intact, although the accelerated upchannel which is anchored in late 2001 has now been marginally penetrated.
At its close of $US 326.10 on March 21, Gold is now back to its levels of early December 2002.
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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"For the first time since Gold began its big run up at the end of November 2002, the percentage fall of the $US since Gold broke definitively through $US 300 almost a year ago is bigger than the percentage $US Gold price rise over the same period."
(The Gold Bull Market - March 7)
Two weeks later, the percentage rise of Gold is not much more than HALF the percentage fall of the $US index over the same period. The word "oversold" is echoing from the rooftops. But these are not "normal times". Please refer to the quote from the Japanese official which appears in our main Gold commentary this week.
The daily bar chart shows the entire Gold "correction" since its 2003 high set on February 4 in bold relief. It also shows the inability of the shorter term (10 day) MA to cross back above the longer term (20 day) MA throughout that period. The weekly bar chart, as already stated, has seen the 200 day (40 week) moving average - which presently stands at $US 329.43 - penetrated. It also shows that Gold has retreated back to what was its ceiling throughout almost all of 2002 - the horizontal dotted line. On the point and figure chart, what looked like a head and shoulders formation has become a head and shoulders formation with a vengeance. Gold has trespassed just below the first of its uptrend lines. The senior uptrend line, anchored back at the April 2001 Gold bottom, is presently at about $US 318.
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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"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 Gold Bull Market This Week - February 28)
In the leadup to war, up until March 10, US stock markets and the $US index were diving to 2003 lows while Gold was simply in a corrective phase. But once war became an imminent certainty, the paper markets have staged HUGE rebounds while Gold has gone from being in a "corrective" phase to being in a WAR phase. It has been pounded flat.
By all the measures on the tables above, and on all the charts, Gold is HUGELY "oversold". Nonetheless, it remains comfortably above the bottom of its post April 2001 upchannel - see the point and figure chart above. We are still waiting for support. The 200 day moving average is a good candidate, we continue to wait and watch.