With the month of July more than half over, Gold's trading range for the month on a spot fuure closing price basis has been $US 9.50 (high - $US 351.70 -- low - $US 342.20). The only "big" move in either direction for Gold came on Tuesday, July 15, the first day of Mr Greenspan's "Humphrey-Hawkins" testimony to Congress. As if it was choregraphed, Mr Greenspan was clearing his throat to begin his remarks as Gold was taking a sudden $US 5.60 dive to close on that day at $US 342.20. By the end of the week, Gold had regained all but $US 0.50 of that $US 5.60 loss. The latest Gold sell off which began seven weeks ago in early June now seems to have found fairly solid support in the low $US 340s
When Gold was closing below $US 345 in late June, the $US index was climbing from the 92.25 2003 low it had set on June 13. It had reached the mid 94's. Now, the $US has climbed further, closing as high as 97.22 on July 15 before closing the week just ended at 96.82 on July 18. The $US is still rising, but Gold in $US terms has stopped falling.
The huge threat which is hanging over Mr Greenspan's claim that he sees "growth ahead" and Wall Street's perennial "optimism" is the parlous state of world and US bond markets. US Treasury debt paper greeted Mr Greenspan's testimony this week with a blow out in yields. By the end of the week ,there were rumours flying that either the ECB or some national European Central Banks were selling US "agency" debt paper.
On the surface, everything remains comparatively quiet. Below the surface, the nervousness is palpable.
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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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, Gold's "sine wave" downwards pattern has flattened out over the past week with the price having not (yet?) broken below the lows set in late June. The low for this downmove (on a spot future closing basis) of $US 343.90 - set on June 26 and equalled exactly on July 9 - was broken on July 15 when Gold "suddenly" retreated $US 5.60 to $US 342.20, but that loss has now been regained.
Gold is challenging the bottom of its post December 2001 upchannel on the longer-term weekly chart - just as it did in April. On the weekly bar chart to the left, you can see that the price action is now straddling the 20 and 40 week moving averages. Spot future Gold hit a new intraday low for July this week at $US 340.80 on July 17.
On the point and figure chart, Gold has an "almost" triple bottom on the chart - the third line of "O"s goes one below the previous two. This points to a SOLID support zone in the low $US 340s. You can see that so far, Gold has retraced about half of the gains it made during the month of May.
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.
Gold, like most everything else, is in the "summer doldrums" on the surface. The paper markets are striving with might and main to put the best face on ALL the news. The questions about the "evidence" presented by the US and UK as a "causus belli" for their Iraq war are still flowing, despite Mr Bush's assertion that its "time to move on". The actual guerilla war now being faced in Iraq by US troops is now being acknowledged by their commander, not two weeks after it was vehemently denied by Mr Rumsfeld. The head of the US Budget Accounting Office is screaming about the size of the deficits. And bond markets continue to suffer as yields blow out.
Gold has found solid support in the low $US 340s. Another rally could start at any time. The markets to watch are the currency markets and the bond markets, specifically the Treasury bond markets. So far, the $US has weathered the sell of in the Treasury markets. That can't last. As already stated, foreign holders are now selling US "agency" debt. At the point where the capital raised from such selling is NOT recyled into other $US denominated assets, the $US will resume its fall. That's when the pressure UNDER the $US Gold price will ratchet up again.