Last Friday (Jan 9), spot future Gold hit a new 2004 high close of $US 426.80. This was fully $US 12.10 above the TOP of its previous bull market spot future closing high - $US414.70 set in early February 1996. This Friday (Jan 16), Gold has closed for the week at $US 407.00, its lowest closing level since December 11, 2003.
The fall for the week is a fairly eye-watering $US 19.80 or 4.64%. The problem - for the financial powers that be - is that the "damage" has already been done. Spot future Gold has broken above a previous bull market top. This is something which has NOT happened since mid 1978 as Gold was just getting going on its surge to its all time high of $US 850 set in January 1980.
Here's what we said about this event in Last week's commentary:
"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. ...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."
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:
|
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.
On the daily bar chart, you can see Gold price hit most clearly. The chart has broken down through both (10 and 20 day) moving averages. It is below the 20 day moving average for the first time since early November.
On the weekly bar chart, Gold has simply had a "down" week, albeit a fairly big one. Last time this happened was when Gold slid almost $US 14 in one day in early October last year. Back then, it took three weeks for Gold to regain previous highs. On the chart, all uptrend lines are intact, the steepest one supporting Gold just above the $US 400 level.
On the point and figure chart, Gold has simply retraced its previous upmove. There are no traces of weakness on this chart at all - yet. The first sign would come if Gold broke below its previous downmove low at $US 405. Below that, the steepest uptrend on the chart presently stands just above the $US 390 level.
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:
|
As you can see, Gold's plunge this week was accompanied, as would be expected, with a turnaround in the $US index.
The main item of importance to keep in mind is that Gold broke decisively above its previous bull market high BEFORE this "correction" took place. This, plus the fact that ALL Gold's bull market trendlines are still perfectly intact, indicates that the bull market is still perfectly intact. Last time there was a $US Gold "king hit", it took Gold three weeks to recover the loast ground. Let's see how long it takes this time.