On April 2, spot future Comex Gold hit an intraday low of $US 255.00 and closed at $US 255.60. As you can see on the daily bar chart on the left, it has been steadily rising ever since. "Steadily" being the operative word, considering that over the past month, Gold has risen a princely $US 11. The spot future price on May 4 was $US 266.50. Over the past week, Gold has risen by $US 2.20.
Over the past three weeks, the open interest on all future contracts has dropped by about 20000 from 130000 (already low) to just over 110000. On May 1, the open interest figure was 110410. That's the lowest since the start of the current bear market back in February 1996. The last time that Gold open interest was lower, at 109340 contracts, was back on March 30, 1993, just before the last bull market in Gold began.
All three charts on this page have been very gradually improving for a month now. If you haven't already done so, take a look at the weekly bar chart of Gold since 1996. You can see that the chart has reached its longer-term (40 week) moving average - it hasn't been above it since mid-2000.
Open interest on the Gold futures market is the lowest for eight years. Not all bull markets begin with a BANG, just as not all bear markets begin with a CRASH. A good example of a slow turn at the bottom is Gold after it bottomed in August 1976. The upmove began very gradually. A good example of a slow turn from the top is the Dow in 1972/early 1973.
Gold lease rates are fairly calm at the moment too. Since the beginning of March, there have been no less than five "spikes" in these rates - all led by the short-term (1 month) rate. And all five of these spikes have quickly subsided. There's no denying that the lower U.S. interest rates go, the less there is to be gained from the Gold "carry trade" (borrowing Gold at a low rate and buying U.S. Dollars at a higher rate). Gold lease rates have been comparatively volatile since March, compared to their placidity earlier this year. So far, however, there has yet to be any fireworks.
"Right now, $US Gold has support at almost all levels between $US 260 and $US 250. On the upside, spot future Gold has only closed above the $US 270 level twice this year - on March 9 and 12. Any close above $US 270 would be significant, but to get to the point where Gold shows a gain on the year, it is going to have to close above $US 273.60 - its close on the last day of trading (December 29) in 2000."
(The Gold Bottom - April 27)
No change on that report this week. Gold traded as high as $US 268 this week, and has yet to break above the $US 270 level. As long as hope springs eternal that the Fed will cut rates as much as it takes to get the stock markets going again, this situation should prevail. We are now back to the situation in which a bad (very bad) economic report (the April U.S. unemployment figure of 4.5% announced on May 4) brings a rally on U.S. markets - solely on increased expectations of another rate cut.
That will continue until it dawns on Wall Street that lower interest rates by themselves are NOT going to "cure" the U.S. economy. And that realisation will come as a result of any combination of lower markets and/or a lower Dollar as a result of these rate cuts.
Finally, Australian Gold stocks continue to improve as does the Aussie Dollar against the $US. More on that in our $A/$US Gold Commentary.