Two weeks ago (August 25 - 29), spot future Gold closed at $US 375.80, $US 3.20 below its February 4, 2003 high. Last week (Sept. 2 - 5), Gold closed only $US 1.30 below its 2003 high thanks to a $US 4.70 jump to $US 377.70 on Friday, September 5. This week, GOLD HIT A NEW 2003 HIGH, the spot future price closing at $US 381.80 on September 9. But Gold couldn't hold that high, closing for the week at $US 375.90 - ten cents above its close of two weeks ago - thanks to a $US 3.90 fall on Friday, September 12.
This is what we said on these pages last week:
"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."
Back in November/December 2002, Gold was trying to break through the mid $US 320s. This was a high which had first been set in the "Washington Agreement" Gold spike of September 1999, then almost equalled by another spike in February 2000, and then hit again repeatedly in May, June, July and September 2002. Gold took a whole month to break through this resistance, closing at just below $US 325 on November 11, 2002 and $US 326 almost a month later on December 6. Gold finally broke through its old highs by rising $US 6.60 to close at $US 331.40 on December 12. In seven weeks, the price had reached $US 380.
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 on Friday to close the week just below its shorter-term (10 day) moving average (MA). Gold has not made it - yet - on its first attempt to decisively break through its February 2003 high.
On the weekly bar chart, this week's trading has been ABOVE the dotted red line connecting the February and May 2003 highs ror the second week in a row. 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 Gold penetrated just ABOVE the TOP of its post December 2001 uptrend when it closed at $US 381.80 on September 9 before falling back below the line again at the end of the week. This line is being challenged again just as it was in January and May 2003.
Two weeks ago, Gold broke above the top of a very tight trading range on the point and figure chart. The chart straight up until it hit its new 2003 high of $US 381,80 on Sept. 9, two "X"s above its previous 2003 high. On a "three-point reversal" point and figure chart, we use a rule that if an upmove gets 3 "Xs" above a previous high point, it has confirmed a new upleg. Gold hasn't made it yet. $US 381, the level Gold reached on Sept. 9, is only two "Xs" above that February $US 379 high.
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.
Please note that Gold was rising with a falling US Dollar until it hit its $US 381.80 high on Tuesday. On Friday, when Gold fell $US 3.90 and lost contact with the $US 380 level, the US Dollar fell again. The Dollar will be at the center of attention for the rest of this month. On Tuesday, Sept. 16, the FOMC meets. They are not expected to do anything. Then, next weekend, an IMF meeting is held in Dubai. After that, on Sept. 23, Mr Bush addresses the UN on the "necessity" for the rest of the world to pitch in and take some of the financial and military burden off the US.
As we said here last week: "The $US 379 2003 high is a big hurdle. Once it is cleared, look out above.". It hasn't been cleared yet. But with Congress threatening to slap 27.5% tariffs on CHINA, with the IMF about to meet in the Middle East, and with systemic lending now steepening to an almost vertical "profile", there is another attempt waiting in the wings.