Despite all the excitement, with Gold breaking decisively through its February 2003 highs this week and climbing as high as $US 393.80 intraday on September 24, the spot future Comex Gold price is actually down - by $US 1.10 - on the week as of its Sept. 26 close of $US 380.80.
Before reading any further here, please go back and read (or re-read) our Special Gold Commentary of September 22.
Finished? OK, now take a look at the charts on this page. Without exception, they are pointing to a new upleg on the post April 2001 $US Gold Bull market - and that is despite the pullback of September 25-26.
Look at what is happening. Between September 9 and 16, Gold corrected from $US 381.80 to $US 373.60 on a spot future closing basis. It then turned right around and soared to $US 387.50 on September 24, only to correct back down to $US 380.80 by the close of the week on September 26.
When spot future Gold closed at $US 381.80 on September 9, the $US index closed at 96.43. On September 26, when spot future Gold closed at $US 380.80, the $US index closed at 94.25. The G-7 may have given the "green light" for the $US to go down against its major trading partners, but the Gold "powers that be" have not yet given the "green light" for Gold to rise against the US Dollar. This week, Gold set new 2003 highs against the $US, it did NOT set new 2003 highs against any other currency except the ones officially "pegged" to the $US.
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, spot future Gold's close of $US 380.80 on Sept. 26 was right on its shorter-term (10 day) moving average (MA). You can also see that the intraday low (379.50) brought Gold down to its longer-term (20 day) MA.
On the weekly bar chart, Gold is now far above both its moving averages and its trendline. Over the past two weeks Sept. 8-12 and 15-19), Gold's weekly intraday high hit an identical $US 384.00. This week, (Sept. 22-26), Gold's intraday high for the week hit $US 393.80. This week, Gold has decisively broken above its closing and intraday highs of early February 2003, thereby confirming a new upleg on the bull market.
Now take a look at the point and figure chart. Here's what we said about it last week:
"Either we will get a double top or we won't. To produce a double top on this chart, spot future Gold is going to have to close BELOW $US 378 without getting any higher than its present $US 381 level. On the upside, if spot future Gold closes at $US 384 or higher, we will have a breakaway gap instead of a double top - and that would be a VERY strong advance indicator for a challenge of $US 400, or higher."
(The Gold Bull Market - Sept. 19)
There's no double top, there is a breakaway gap. On this chart, Gold is now distributing ABOVE its February highs. Support is anywhere between the present levels and $US 375. Resistance is at the recent high close of $US 387. As you can see, the upchannel on this chart now has its top ABOVE the $US 400 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.
What happened on September 25-26 to "cause" this turnaround in the Gold price? There was some concerted selling of "large cap" Gold stocks in the US - into the teeth of a rising Gold price early on September 25. The Swiss repeated a Gold sales program which had already been announced and fell within the rules of the Washington Agreement. US second quarter GDP was revised upwards again, this time from 3.1% to 3.3% as more military spending was unearthed. This is, of course, economic "growth" which has already taken place. Comex options and over the counter options on Gold expired.
Gold has established a new 2003 high in $US terms and has confirmed a new upleg. It is languishing far below 2003 highs in terms of most other currencies, making Gold a bargain for any European, Canadian, Aussie, Kiwi, Canadian etc. etc. The $US, which has been falling for nearly two years, has now had its bear market given the "seal of approval" by no less an authority than the G-7.
Just keep following the trend, which is up. We can be absolutely sure that the US financial powers that be, including the Fed, are getting very uncomfortable with a Gold price approaching $US 400. They will be doing what they have been doing ever since mid 2001, trying to keep the Gold price down. Temporary successes they will have, but they will lose the game. The horrendously overstreched nature of the US economy and the terminally overindebted position of the US government guarantees it.