Five straight weeks of falls by the $US (with a G-7 meeting in the middle of it) have been broken this week with the $US index managing to gain ground for the first time since early September. Of course, this $US fall was punctuated by a CLASSIC "Gold raid" two weeks ago on October 3 when the spot future Comex Gold closed down $US 13.70 on the day at $US 369.40. Since then, Gold has retreated to just below the $US 370 level, its lowest since late August, twice. On October 17, Gold closed just above the $US 370 level at $US 371.80 - down $US 0.90 on the day and down $US 1.80 on the week.
Take a look at these point and figure chart of Gold in terms of Yen, Euros, and Aussie Dollars. Note the precipitous falls from recent highs in all three currencies (and many more, by the way). These falls have come since Gold hit its 2003 highs ($US 387.50 on a spot future closing basis) in $US terms on September 24, just over three weeks ago.
These Gold falls in terms of "foreign" currencies are a direct reflection of the fact that Gold is down in $US terms even though the $US has continued to FALL in terms of all other major world currencies. For non-Americans, Gold is becoming an ever more screaming bargain, especially as the cost of holding $US and $US denominated "investments" continues to rise.
So, Gold has broken its uptrend in terms of Euros and Aussie Dollars and Canadian Dollars and Yen and many other currencies. It has NOT broken its uptrend, far from it, in terms of US Dollars, and that the Gold "price" which everyone watches..
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 week has been pretty subdued, especially by the standards of recent past weeks, on the $US Gold price front. On the daily bar chart, you can see that the $US 370 is firming as a support point. Initial resistance can be found at the longer-term (20 day) moving average which is now just below the $US 380 level.
On the weekly bar chart, the situation has hardly changed at all since last week. $US 370 is firming as support. Below that, major support is just above the $US 360 level - the point where the downtrend (the dotted red line) and the steepest uptrend (the green line) meet.
On the point and figure chart, we have a tight distribution zone similar to the one which formed two months ago in mid/late August, just before Gold broke out to reach new 2003 highs in late September. The latest distribution zone has a double bottom at $US 370 and a breakout point in the high $US 370s. Weakness would only be indicated on this chart if the Gold price falls below the steepest uptrend (green) line, presently sitting at about $US 368.
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. It did this by closing significantly above its previous 2003 high which had been set nearly nine months earlier in early February. Take another look at the point and figure chart. By all technical precedent, Gold should remain in its upchannel - that is - it should not break below the bottom trendline now set just below the $US 370 level. $US 370 is now established as support on all three charts. But this is Gold, the investment which the monetary powers that be do NOT want to rise. We'll see what happens.