Last week (August 25 - 29), spot future Gold closed at $US 375.80, $US 3.20 below its February 4, 2003 high. This week, Gold has closed only $US 1.30 below its 2003 high thanks to a $US 4.70 jump to $US 377.70 on Friday, September 5. As all the charts on this page (and linked to this page) show, Gold is right on the verge.
Since its $US 7.70 spurt to $US 373.50 on August 27, $US Gold has been bouncing between its last two highs (on a spot future closing price basis), the $US 372.20 May high and the $US 379.00 high for the year (so far) set in February.
Leaving aside any "manipulation" which might enter the picture, any market usually stops for breath after correcting as it approaches and then hits past major highs. There are two reasons for this. First, people who bought at those highs take the chance to "get out even". Second, the previous high is seen as "resistance" and there is always worry that the new upmove might fail to penetrate this resistance.
For the same reasons, when a market DOES penetrate above a previous major high, it very often accelerates rapidly. Investor sentiment turns rapidly from fear of losing by being IN the market to fear of missing out on gains by being OUT of the market. In the Gold market, the most recent example of this phenomenon took place between December 2002 and January 2003. When Gold broke above six month highs in December 2002, the price rapidly rose from the mid $US 320s to the 2003 highs around $US 380 set back in February. Given a spot future close above $US 380 in the days (weeks?) to come, a repeat performance is a HIGH likelihood.
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 bar chart, the Gold price came back to touch its shorter-term (10 day) moving average (MA) earlier in the week before its spurt on Friday carried it to the second highest spot future close of the year. The $US 379 2003 high is the only barrier left between the overwhelming Commercial short position on the Comex and potential carnage.
On the weekly bar chart, this week's trading has all been ABOVE the dotted red line connecting the February and May 2003 highs. The longer-term chart shows that the series of lower highs and higher lows set since the February 2003 has been broken. It also shows that for the second week in a row, Gold is right at the TOP of its post December 2001 uptrend.
Last week, Gold broke above the top of a very tight trading range on the point and figure chart. Ever since then, the chart has gone straight up and is now two "X"s below its 2003 high. On this chart, a spot future close of $US 382 or higher would CONFIRM another upleg in the Gold bull market.
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.
Last week, we said that a lot of "Gold bugs" are nervous because Gold was getting very close to its 2003 high again, after seven months of trying to exceed it. Of course, Gold is even closer this week.
The main problem here is that most US investors, including the ones who trade "paper Gold" on the Comex, are clutching feverishly onto the "feelgood" economic messages coming out of Washington and Wall Street while the rest of the world is staring with growing alarm at the painfully obvious "overstretch", both strategic AND financial, of the USA.
The US government has now admitted that they can't bear the burden of their Iraqi occupation alone. Why else go to the UN for help? And how could anyone outside Washington or Wall street take ANY US economic numbers seriously when it is reported that the US economy lost 93,000 jobs in August while US "unemployment" FELL(!??) from 6.2% to 6.1%.
As long as the US government could set the global geo-strategic and geo-financial agenda, they could paper over the ever widening cracks in their own internal economic and financial structure. As the Iraqi debacle so eloquently illustrates, those days are OVER. Even the IMF is now warning the Bush Administration about the consequences of their budget deficits. In such an atmosphere, the performance of Gold is remarkable, so far, for its reticence. The $US 379 2003 high is a big hurdle. Once it is cleared, look out above.