$US Gold hit its low on its Iraq war correction on April 7 when it closed at $US 321.40. On May 16, spot future Gold closed at $US 354.90. In the six weeks since April 7, $US Gold has risen $US 33.50 or 10.42%. It has not risen quite that far in terms of other currencies. Here's an example (closing prices on April 7 and May 16):
The Yen Gold price is a bit of an anomaly. It is a well known fact that the Bank of Japan has been doing everything possible to limit the rise of the Yen against the Dollar. They have repeatedly been spotted in the forex markets buying Dollars for Yen, with the result that they Yen's appreciation against the Dollar has been much more muted than it would otherwise have been. Hence, the Yen Gold price is up more than it would otherwise have been.
In terms of Euros, Gold has risen marginally since April 7. In terms of $A (and $C), it has hardly moved. And in terms of several currencies (for example, the Brazilian and Argentinian currencies), Gold has actually fallen since it hit its $US 2003 low of $US 321.40 on April 7. What you see on the charts to the left is a Gold recovery, true, but so far, it is only a Gold recovery in $US terms.
At the beginning of 2003, Gold was $US 348.20. Since the beginning of 2003, the $US index has fallen 7.90%. If Gold had simply "mirrored" this fall, it would now be 7.90% above where it began the year. That's $US 375.70. Gold is lagging badly behind the fall in the $US this year - and that CAN'T last.
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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Last week, for the first time since we put this table up, the percentage fall in the $US index since March 2002 was BIGGER than the percentage fall on US stock markets (as measured by the Dow) over the same period. This week, with the Dollar down further and the Dow up slightly, that spread has widened. US stock markets have had the Dollar pulled out from under them and are standing in mid air. The Dollar is plummeting and so are Treasury yields as the Fed and US commercial banks buy them to give the Treasury breathing space while the Senate is debating a lift in the debt limit. The pressure UNDER the Gold price is immense.
On the daily bar chart, Gold is on a railroad track aiming back towards its early February ($US 379 spot future close) highs. The shorter-term (10 day) moving average well above the longer-term (20 day) one and both climbing at the same rate. The actual price remains well above both.
On the weekly chart, Gold has spent the entire week trading above its shorter-term (20 week) moving average. On the longer-term weekly chart you can see that Gold is now closer to the top of its post December 2001 uptrend than the bottom of it. A month ago, Gold was BELOW the bottom of that uptrend.
On the point and figure chart, Gold has now risen $US 32 in a straight line since turning up from the $US 321.40 low set on April 7. Gold has repeatedly moved above $US 355 this week in intraday trading only to fall back. If you look at the right shoulder of the head and shoulders formation on this chart, you can see that a lot of the selling has come from investors who bought the last time that Gold traded in the $US 350-355 range - they are getting out even.
Here's another perspective - a comparison between Gold's 2002 low and its present price and the $US index 2002 high and its present "price". All data is on CLOSING levels:
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The bogey man of "deflation" being talked up by the Fed has done nothing to help the US Dollar, but it HAS allowed the Fed and the US commercial banks to keep US interest rates falling despite the plummeting Dollar. When the Brazilian currency was plummeting towards the end of 2002, Brazilian short-term rates were above 20%. Now, the Dollar is plummeting, yet Treasury 3-month rates are 1.03%. There is no precedent in financial history for rates to be so low on debt denominated in a currency which is falling so fast.
This is a situation which CANNOT LAST. Gold has now recovered 58.2% of its February 4 to April 7 falls ($US 379 to $US 321.40). The Gold/$US index ratio is now only marginally (1.28%) below its level of February 4. there are two items to watch closely . One is for the Gold/$US ratio to set a new 2003 high with the actual $US Gold price still well below its 2003 high. Another is for any upturn on Gold lease rates, which hit new 2003 lows on May 16. If (when) both of these events take place, we can know that the pressure UNDER the Gold price is reaching critical mass.