"$US 400 has been cracked, but not quite yet broken. There is still a residual nervousness that this new level will hold. Remember, Gold poked its nose above the $US 300 level back in September 2001 but it took until late March 2002 before the $US 2003 level was definitely broken - it took that long for Gold to close above $US 310."
(The Gold Bull Market This Week - December 5)
The nervousness still remains, as witness the performance of Gold stocks over the past week. Since December 5, The Privateer's Australian Gold Stock index (XGO) is down just over 100 points or about 5%. This index has not yet had a chance to react to Gold's $US 4.80 rise in New York on December 12. However, on December 12 in the US, the HUI only managed a 1% rise while the XAU was up just over 0.5%. That is not a sign of confidence, not yet.
Gold itself had its only real "hiccup" for the week on December 10 when a $US 412 intraday high was pushed down to $US 406.20 by the close of trade. On the week as a whole, spot future Gold rose exactly $US 3.00 to another 2003 high of $US 409.40, pushed into the "black" by a $US 4.80 rise on December 12.
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.
And here we are, more than $US 100 (or 33%) higher. We are confident that the REAL breakthrough of $US 400, which will come with a break above $US 420, will be a much bigger "sea change" than breaking through $US 300 was.
Since early November, $US 400 has been a ceiling. With the very mild correction earlier on this week, it is fast becoming a floor. You can see that point and figure chart that Gold has now had a correction and set a new high, all ABOVE the $US 400 level.
On the daily bar chart, you can see the minor correction between the intraday highs and lows on December 10 - 11. This blip unnerved Gold stock investors who anticipated a fall back below $US 400 and Gold stocks were sold off. Instead of going down, Gold closed the week at another high of $US 409.40.
The weekly bar chart shows nothing exept the steepening uptrend lines on Gold along with a week unsullied by any "correction" at all. The shorter-term (20 week) moving average continued steepened, $US 400 Gold has been breached and the upward pattern is like a railroad track.
As already stated, the point and figure chart, shows a very minor correction followed by a new high, so far 1 "X" above the previous high. A Gold spot future close of $US 411 or higher, 3 "Xs" above the previous high, will confirm that this correction has held above $US 400. That will increase confidence and induce more investors to start looking for HIGHER prices instead of looking back at the lower prices of the past.
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.
President Bush has just confirmed (echoing his Treasurer, Mr Snow) that the US has a "strong Dollar policy". This might just be the catalyst needed for the beleagured Buck to REALLY go south. With the Fed (see Gold This Week) having all but pledged to keep current US 1.00% interest rates intact until 2005, the Dollar has certainly got its work cut out for it.
Investors are not yet confident that Gold won't go back BELOW $US 400. The "mini correction" this week followed by the close at a new high will be eating away at that lack of confidence. Don't forget, it took almost six months for Gold to rise from $US 300 to $US 310 in late 2001 - early 2002. So far, Gold has only spent two weeks above $US 400.