SMACK! An absolute CLASSIC "Gold raid" by the boys on the Comex market in New York. They waited until everyone else in the world (including the new Indian paper markets) had finished their Gold and Silver trading for the week and then jumped in with both feet. The last market to trade before New York had the precious metals to themselves was London, where the PM fix was set at $US 384.25 - $US 2.05 higher than the PM fix on the previous day.
The Spot future Comex market opened with Gold at $US 383.00 - ten cents below its price on the previous day. The intraday high for the day was $US 384.50. Then, London closed and a US employment report came out citing a net "gain" in employment. SMACK! Gold was driven down as far as $US 368 before closing down $US 13.70 on the day at $US 369.40. Our preliminary statistics show volume on October 3 at an ASTRONOMICAL 165,000 contracts.
As a cursory glance at the charts on the left illustrates, war has once again been declared on Gold. One doesn't have to look far to find the reason. The US Dollar has been sliding fast ever since the Dubai G-7 meeting two weeks ago. This week, it was threatening to drop below its previous 2003 lows on a $US basis, despite the fact that the Bank of Japan has spent the past four trading days intervening to prop the Dollar up against the Yen.
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.
The technical damage is most obvious on the daily bar chart. On this chart, Gold has smashed down through both its 10 and 20 day moving averages, of course, and has also dived below the trendline (dotted green line) which has supported its rally since its April 2003 lows. On this chart, there are no obvious support levels, it is a question of waiting to see where support does show up on the chart itself.
On the weekly bar chart, there ARE support levels - obvious ones. Both the accelerated uptrend line and the downtrend (dotted red) line drawn through previous peaks are at or about the $US 360 level. The shorter-term (20 week) moving average (MA) stands at $US 362 while the longer-term (40 week) MA stands at $US 354.50. The uptrend on this chart is perfectly intact.
The point and figure chart is interesting. We have an upside breakaway gap followed by a tight trading range in the form of a "V". With the fall on October 3, Gold has dropped out of the bottom of that "V" and back below the previous 2003 highs set in February. The accelerated uptrend line on this chart presently stands at about $US 362 - the same level as the shorter term MA on the weekly bar chart.
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.
When Gold rose $US 5.30 to $US 387.20 on September 22, it established a new upleg in its post April 2001 bull market. The big $US 13.70 fall of October 3 has NOT changed this fact in any respect. AS the charts show, the upchannels on the weekly bar chart and the point and figure chart are still perfectly intact. What HAS been established is the level of desperation of those who want to "govern" the price of Gold, that level is very high indeed. There was absolutely NOTHING in the way of economic/financial/military/political/strategic/etc. news which came out on Friday afternoon in New York which would justify such a big selloff.
This report focusses on the technical picture for Gold. The long-term trend is up. The bull market validated another leg up in its bull market just two weeks ago, in the immediate aftermath of the Dubai G-7 meeting. The purported US preference for exchange rates set by the market which was the centerpiece of the communique lasted just over a week. Now, the gloves have come off, and whenever the financial gloves come off at this level, Gold is hit. We'll see where it turns this time. As the situation in the financial world continues to deteriorate, it is merely a matter of time before $US Gold has a big UP day (when was the last time that spot fuure Gold CLIMBED $US 13.70 in a day?), despite any and all attempts to prevent it.