The major event for Gold over the past week has been the new 2003 highs set by Gold stocks in both the US and Australia. This even signals the second leg in the Gold stock bull market, and is an infallible indicator that Gold itself will follow. For more, please see our main Gold commentary.
Of course, Gold had a good week. With the exception of the $US 2.80 fall (to $US 363.20) on Friday, August 15 on desultory volume and amid the biggest power blackout in North American history, Gold rose every day this week. the gain for the week was a healthy $US 6.90. Further, with Gold closing at $US 366.00 on August 15, this upmove has now gone higher than the last upmove which peaked on July 28 with spot future Gold closing at $US 364.90.
That was before Gold was hauled down $US 18.80 in four trading days to prepare for the Treasury refinancing Auctions over August 5-7.
This week too has seen the latest FOMC meeting on August 12 at which the Fed held official rates steady and stated as bluntly as they ever state anything that they would NOT be raising rates "in the foreseeable future". The next day, the Treasury market swooned with all issues of three-year or greater maturity hitting new 2003 high yields. So much for "reassurance".
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.
This is the first week in the past four when Gold has not seen a $US 10 plus move over the week. Three weeks ago, Gold was up $US 15.50. Two weeks ago, it was down $US 16.70. Last week, it was up $US 10.20. This week, it was up another $US 6.90. You can see the whole thing played out on the daily bar chart. Note that the two (10 and 20 day) moving averages have converged this week.
On the weekly bar chart, the shorter-term 20 week moving average has turned up this week, very reminiscent of what it did at the start of Gold's last "run" in early May. The shorter-term MA is comfortably above the longer-term (40 week) one with the Gold price again comfortably above both. Take a look at the 40-week MA on the longer-term weekly chart. You can see that it has been tracking the accelerated (post December 2001) uptrend line ever since it was estabished and continues to do so. Having overshot and undershot this uptrend in February and March 2003, Gold has remained firmly in it ever since and now again sits about halfway up the channel.
"The high point for the line of "X"s preceding the present one was $US 364 set on July 28. If this move get above that July 28 level, a strong signal will be given for an assault on Gold's 2003 highs ($US 379 on a closing basis)". That's what we said about the point and figure chart here last week. As you can see, Gold has climbed above that $US 364 high htis week, but only by two "X"s as yet. On this chart, Gold has been particularly volatile since it set its "triple bottom" just below the $US 345 level.
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.
The Treasury got through its refunding auctions and the Fed has met and left interest rates alone. Bond yields are still rising. And now, with the blackout, competent US and Canadian engineers are articulating what most knew but none were prepered to mention, the fact that the US has a "third world" power grid. It must be true, Mr Bush wants the grid "updated". The cost? Well, they haven't really gotten around to figuring out that yet.
No sooner had the "economic recovery" been touted by the President of the US than the backbone of that recovery, the power grid, cracked right down the middle. This is one more piece of evidence of the demise of the real goods industries of the US. For MUCH more on this, please see the new issue of The Privateer - #482 - published on August 17.
With the new 2003 multi-year highs on US and Australian Gold stocks, investors have shown that they expect Gold to break out of its doldrums very soon. In EVERY previous instance of the confirmation of a new leg in a Gold stock bull market, physical Gold prices have confirmed the confidence. This one will be no different. We happily await a new upleg on the GOLD bull market. It's merely a matter of time.