Last Monday, January 5, spot future Gold jumped $US 8.70 to $US 424.80 and we ran an update on our Gold Bull market weekly report. If you haven't already read it - you can do so here. By the end of the week, the spot future price was up another $US 2.00 to a decade plus high of $US 426.80. What we said on January 5 stands - Gold has DECISIVELY broken above its previous (February 1996) bull market top.
This event, breaking through the previous bull market high, is a VERY big deal all by itself. Since Gold reached its all time high of $US 850 in 1980, each succeeding bull market - in 1982-83, in 1985-87, and in 1993-96 has topped out LOWER than the previous one. This was one of the main reasons why Gold "commentators" could get away, as they did up until recently, with claiming that Gold had been in a bear market for more than 20 years.
Now, the chain of descending bull market tops maintained ever since 1980 has been broken. At its January 9, 2004 spot market close of $US 426.80, Gold is now $US 12.10 above the spot future high ($US 414.70 on February 2, 1996) which marked the top of its previous bull market. On our strategic $US 5 x 3 point and figure chart, Gold has now risen $US 55 in a straight line. That's almost as big as the $US 60 straight line that Gold traced out in December 2002/January 2003. The BIG difference this time is that the entire "straight-up" rise has come from a base which is ABOVE the downtrend line anchored in Gold's all time high back in 1980.
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 has now come with a break above $US 420, will be a much bigger "sea change" than breaking through $US 300 was.
The figures in the table above cover a time frame of nearly two years. TAKE A GOOD LOOK AT THEM! US investors could have sold their Dow stocks in March 2002 and put the proceeds in any other major currency (except the ones tied to the $US) and done MUCH better than they have done by holding on. They could have put the proceeds in Gold and done better still, MORE than compensating for the dive in the Dollar over the period.
On the daily bar chart, you can see that the spot future Gold price has been trading ABOVE its 1996 high for the entire week. The other item to note is that daily volatility has greatly increased again this week after having died down for the three previous weeks to year end 2003.
The same is true on the weekly bar chart. As Gold approached and then reached its 1996 highs in the last two months of 2003 - the weekly bars became progressively smaller as the "spread" between the weekly high/low contracted. Now, the 1996 highs have been breached and the weekly volatility has expanded again.
On the point and figure chart, distribution ABOVE $US 400 followed by a high break indicates pretty decisively that the $US 400 support level has held. We now have a breakaway gap on this chart, which is often an indicator of an acceleration. An acceleration we have had - up almost $US 11 over the week of January 5 - 9.
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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There you are. On this table Gold is up by more than half while the US Dollar index is down by nearly one-third. You will find charts of the $US index and Gold here for comparison.
The TOP of Gold's previous bull market has NOT caused a correction in the present $US Gold price run. But as fast as Gold is advancing in $US terms, it is still lagging far below 2003 highs in terms of the currencies which are rising the fastest against the $US. We still await Gold's REAL boom - the point where it starts to rise against ALL paper currencies, not just the US Dollar. Stay tuned.