May 18 was, of course, the day when Gold leaped $US 13.80 in Comex trading to smash through everybody's "resistance point" at $US 274-75 and close at $US 287.80. At the close of this week, Gold is almost $US 10.00 below that level, having closed on May 25 (in a shortened trading day) at $US 278.20. But as you can see on the charts to the left, the "damage" has been done.
What the $US 13.80 jump on May 18 did was to confirm that the bottom for $US Gold was IN. The "double bottom" around the $US 253-255 level set in August 1999 and again in April 2001 showed it clearly.
OK, so Gold has "bottomed". Now what? Well, look at the Gold "spikes" in late 1999 and early 2000. Compare them to what is now happening. Look in particular at the action preceding the first spike, the "Washington Agreement" spike of September 1999.
See the double bottom on the chart just before the spurt. That was the BEGINNING of the bottom formation. Now, look at the action leading up to the spurt on Friday, May 25. Yep, that's another double bottom, but one with a HUGE difference. This one came at the END of the bottom formation - at almost exactly the same level as the first one.
(The Gold Bottom - May 18)
So, what happened this week? Well, Gold hit almost $US 300 in early Asian trading on May 21. Then Hong Kong opened and the price was promptly knocked back below the $US 290 level again. This would simply require a fairly large amount of metal to hit the floors (there are reports that 4 Tonnes of Gold did just that at the opening). That wouldn't have reversed a rally in London or New York, but it was sufficient to do so in the much smaller Hong Kong market.
We go into more detail of what subsequently happened, especially in New York, on our Gold This Week page. Now, where do we stand on a technical basis?
Look at the last six trading days. On a CLOSING price basis, spot future Gold rose from $US 274.00 to $US 287.80 on May 18. This week, after reaching an intraday high of $US 293.50 on May 21, Gold has given back most of these gains, closing on May 25 at $US 278.20. All we can say with certainty about this market "action" is that Gold has certainly "woken up".
But don't forget, the first $US 10 of this rise (($US 255 - 265) took five weeks. The next $US 9 ($US 265 - 274) took less than three weeks. And the leap from $US 274 to $US 293.50 (intraday) took less than TWO TRADING DAYS.
In just under two months, spot future Gold has climbed (on a CLOSING price basis) from $US 255.60 to $Us 287.80. It now stands at $US 278.20. That's a "correction" of just under 30% of the move. And finally, Gold has had its first substantial weekly fall (it fell $US 0.50 in the week of April 20-27) for the past eight weeks this week.
All the charts on this page are perfectly intact. If these were charts of ANYTHING else but $US Gold, no technical analyst would hesitate to predict higher prices - SOON. But Gold is Gold, and while the charts remain excellent, the motivation to suppress the $US Gold price has certainly not gone away. Gold still has to get above - AND STAY ABOVE - $US 300. That's the TRUE test. Stay tuned.