Last week - on May 16 we pointed out that while Gold was certainly recovering from its Iraq war losses in terms of US Dollars, it was NOT yet recovering in terms of the currencies of the major US trading partners (with the exception of the Yen). A week later, Gold has broken loose and has risen in terms of ALL major currencies.
Gold is "gap up" in terms of $US, $A, Yen, ane Euros over the past week. That is something which has not been seen since Gold was "lifting off" in December last year. $US Gold has not yet reached its February 4 closing high of $US 379, but it got to within $US 6.80 of that level on May 21.
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.
(The Gold Bull Market - May 16)
And it hasn't lasted. The $US index hit a new 2003 low of 93.13 on May 23, that's a fall of 8.93% so far this year. Gold started 2003 at $US 348.20. If Gold had simply "mirrored" this fall, it would now be 8.93% above where it began the year. That's $US 379.30 - almost exactly the same as Gold's 2003 spot future closing high of $US 379.00 set on February 3. Even with the big upmove this week, Gold' advance is still lagging the decline of the $US since the start of the year.
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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On this table, Gold's gain has now caught up with the Dollar's loss - just. The situation which began last week, with the Dollar having lost more than the Dow in percentage terms, has actually widened. Back in February, the last time that $US Gold was this high, many were claiming that the metal was "overbought". Not many are game to say that this time, given the plummeting Dollar.
On the daily bar chart, the beautiful upward railroad track continues with Gold encountering a bit of resistance at or about the $US 370 level in recent days. Have a look at this longer-term weekly bar chart and you will have no problem seing why - Gold has made it right back to the top of its upchannel.
On the weekly chart, you can see that Gold in $US terms has been accelerating for the entire month of May so far. Apart from the resistance around the $US 370 level already mentioned, Gold's only remaining risistance on the chart is the $US 379 spot future closing high of February 4
The point and figure chart is quite spectacular. At its $US 372.20 close on May 21 Gold had risen $US 50 in a straight line - with no corrections at all - since turning up from the $US 321.40 low set on April 7. Now, we have the first small downturn on this chart.
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.
Late last year, the Fed introduced the bogeyman of US "deflation". As one result, Gold took off on a run which took it from $US 320 to $US 380. Over the past three weeks or so, they have revived the message - and Gold has taken off again. Whatever prices do, the REAL situation vis a vis monetary creation is best illustrated by the Senate's passage of a bill on May 23 which raises the Treasury's debt limit by a record $US 984 Billion.
This week, the Gold/$US ratio set a new 2003 high with the actual $US Gold price still below its 2003 high. Despite the best efforts of the Bank of Japan, which is buying HUGE amounts of US Dollars with Yen on a daily basis, the Dollar sag is accelerating. Now, a new upleg on the $US Gold bull market simply awaits a spot future close above $US 379.