Two weeks ago, as the Iraq war began, spot future Gold slumped all the way down to $US 326.10. Last week, as the war continued and questions began to be asked about the planning for the war, Gold recovered. At the end of March, rumours were rampant that the US forward thrust towards Baghdad would be "halted" while the troops were resupplied. This week, that did not happen. Throwing all caution to the winds, the US gained the outskirts of the city, having encountered almost no opposition at all. With this thrust, Gold, which closed on March 31 at 335.90 - has slumped to a new 2003 low of $US 324.90 on April 3 before closing the week on April 4 at $US 325.30.
Gold was pushed below its moving average on March 21 when it fell $US 6.90 t $US 326.10. Now, it has happened again as Gold slumped $US 9.40 on April 2-3 to $US 324.90. The Gold uptrend is still perfectly intact (see this weekly bar chart) but the second penetration of the 200 day MA has convinced most Gold analysts that further falls in Gold are on the cards, ESPECIALLY if the Iraqi forces in Baghdad fold up and roll over.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 to stay one year ago - on March 27, 2002:
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As big as the two month correction since Gold hit its 2003 spot future high of $US 379 on February 4 now is, you can clearly see the vast superiority of Gold's performance compared to that of the $US and the Dow over the past year.
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 shows that Gold is now trying to break below its 200 day moving average and 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, a breakaway gap is threatened if Gold closes below $US 323.
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 you look at the point and figure chart above, you can see that it was the onset of war which turned what was a potential "head and shoulders" formation into an actual one. There is not yet a definite "support point" on this chart. To establish one, Gold will have to turn up from its present levels and then rise into at least the high $US 330s. If Gold goes lower, then the trendline at the base of the Gold bull market uptrend, presently just below the $US 320 level, is the next MAJOR support line.
While the war progresses, all we can do is wait for confirmation of support for Gold. the US is presently "fighting" on so many fronts, military, geo-policital, financial, fiscal, and economic, that a reverse somewhere is a certainty. It's simply a matter of which, and when.