Nothing like a long (Memorial Day) weekend combined with an end of month option expiry to get the juices flowing on the Comex. Once trading got back into the swing on Tuesday, May 27, we were treated to BIG daily volumes and daily price swings of up to $US 10. As one might expect on the day that the Dow set a new 2003 high and the $US index recovered from 2003 lows, Friday, May 30 ended up one of the down days, with spot future Gold falling $US 5.10 on the day to close the week at $US 364.50
Last week, Gold was "gap up" in terms of $US, $A, Yen, and Euros. This week, Gold is down - marginally - in terms of three of the four currencies and up in terms of Yen. The Bank of Japan is shelling out TRILLIONS (4 TRILLION in May) to keep the Yen down against the Dollar.
The $US index hit yet another new 2003 low this week, 92.81 on May 27, that's a fall of 9.24% so far this year. Gold started 2003 at $US 348.20. If Gold had simply "mirrored" this fall, it would now be 9.24% above $US 348.20, the level at which it began the year. That's $US 380.40 - a very uncomfortable $US 1.40 above Gold's 2003 spot future closing high of $US 379.00 set on February 3.
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, Gold's gain had caught up with the Dollar's loss. This week, it has fallen marginally behind again. You can see the resistance quite easily on the point and figure chart and on the longer-term weekly bar chart where Gold has spent the past two weeks straddling the top of its upchannel.
On the daily chart, Gold has dipped back below its shorter term (10 day) moving average as the resistance from the top of its upchannel bites. The same is true on the weekly chart, where Gold has had its first down week for nearly two months after seven straight weekly rises.
The point and figure chart is a classic example of the fact that no market goes straight up, although it was giving a pretty good imitation of one that does for nearly two months.
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.
This weekend, there is to be a G8 meeting in France. President Bush has signed, with great fanfare, the bill which includes his tax cuts. Admittedly, he wanted $US 750 Billion and ended up settling for $US 350 Billion - over ten years. He also signed the bill which raises the Treasury's debt ceiling by nearly $US 1 TRILLION. There was no fanfare whatsoever about that. After being frozen at around $US 6.46 TRILLION for nearly three months, the Treasury's reported "debt to the penny" has leaped $US 97 Billion in three days.
Think about it. The Fed and the Treasury have now spent nearly a month warning about the potential perils of "deflation". For almost all of that time, $US Gold has been rising and the $US falling. No one seemed to notice. But what would have happened if Gold had taken out its February 2003 highs? Even Mr Greenspan, with is great talent for obfuscation, would have been hard pressed to equate THAT with deflation, wouldn't he?