Here we are, a week after the Independence Day holiday and almost to the middle of July. The markets are in the summer doldrums. Gold closed on July 11 at $US 345.10, exactly $US 0.40 lower than it closed two weeks ago on June 27. Over the same period, the $US index has climbed a bit - from 95.49 to 96.13, and the Dow has gone from 8989 to 9119. So far, not a hell of a lot has happened since the Fed cut rates on June 25.
On the surface, it has been a good second quarter of 2003 for the paper markets. US stock markets all hit their 2003 lows in mid March, just over a week before the Iraq war started. Now - on July 11 - the Dow shows a 2003 rise of 9.33% with the S&P 500 up 13.45% and the Nasdaq up a whopping 29.83%. In fact, with the exception of the runaway Thailand market which is up 35.88% on the year so far, the Nasdaq is about the best performing major stock index in the world this year, at least on a nominal basis.
Even the big global government bond sell off which threatened to go into melt down in the lead up to July 4 has levelled off over the past week.
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:
|
If you doubt that Gold's breaking back above the $US 300 barrier to stay in March 2002 was a "sea change" for world markets, a glance at the percentages in this table should settle the matter beyond all reasonable doubt.
On the daily chart, you can see that Gold is in a "sine wave" downwards pattern with the drop in June/July being about half the rise in May. Please note that the low for this downmove (on a spot future closing basis) is $US 343.90 - set on June 26 and equalled exactly on July 9.
On the weekly bar chart, Gold has retreated back to the bottom of its post December 2001 upchannel on the longer-term weekly chart. Actually, on intraday lows, Gold spilled just below the line and hit its longer-term (40 week) moving average exactly this week. Gold's intraday low for the week was $US 342.30 set on July 11. It closed for that day at $US 345.10.
On the point and figure chart, Gold has a potential "double bottom" on the chart. This potential will be realised if spot future Gold closes at or above the $US 347 level before closing below $US 343. The lower uptrend line, which defines the entire Gold bull since its bottom in April 2001, still stands at about $US 327.
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:
|
You will find charts of the $US index and Gold here for comparison.
Right now, there are a number of potential "surprises" hanging over the paper markets. While markets have "smoothed out", there has been no letup of paper creation by the Fed nor has there been any letup of deficit spending by the US government. California and about six other US States are defacto bankrupts and are running "under management" until some kind of bailout package can be cobbled together. The bond bloodbath has not reversed, it has merely stalled.
On US stock markets, a correction of major proportions has begun in the July/August time period every year since 1997.
For Gold, support is at present levels. Any further spot future weakness, especially a close below $US 340, points towards a possible testing of the major uptrend line just below the $US 330 level. On the upside, Gold remains at the bottom of its post December 2001 accelerated uptrend. If it gets back above $US 350, it will have comfortably entered that channel again - and the "sine wave" action which has been a feature of Gold trading this year looks set to continue. That is, unless and until Gold can get above its $US 379 2003 spot future closing high.