The day after the FOMC meeting, January 29, was the day when Gold did its swan dive, falling $US 16.10 on the day to break below the $US 400 level and close at $US 398.50. Since then, Gold has traded in a tight range between $US 398.10 and $US 403.60 - spot closing prices - with the "high" for that range coming on February 6 when spot future Gold jumped $US 5.50 on the day.
The $US 5.50 rise on February 6 was significant, being the trading day which coincided with the first day of the two day G-7 meeting taking place in Boca Raton, Florida. Indeed, on the day, Comex Gold traded in a $US 10 trading range and closed towards the top of that range.
So far, Gold has had two big "down" days in its correction from the January 9 2004 high close of $US 426.80. The first was a fall of $US 13.30 on January 15, a few days after a G-10 meeting at which the speculation began that the Europeans might be on the verge of either lowering their rates and/or intervening in the currency markets to assist Japan to support the Dollar. The second was a fall of $US 16.10 on January 29, the day after the FOMC meeting in which a small change in the wording of the press release sets off a storm of speculation that the Fed might raise rates "sooner" than expected.
Those two big selloffs served to push Gold back towards and then below $US 400, "clearing the decks" for the G-7 to meet without having to look over their shoulder to THE alternative to the currencies they were discussing.
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.
On a week to week closing basis, spot future Gold has moved a grand total of $US 1.40 (upward) over the past week. Nonetheless, there has been a significant technical development - see the point and figure Gold chart on this page.
You can see the two big daily selloffs in this correction best on the daily bar chart. You can also see that since the second selloff on January 29, daily volume has dropped quite dramatically. It is obvious on this chart that Gold has established a "support zone" just below the $US 400 level and then broken higher with the upmove on February 6.
On the weekly bar chart, Gold spent the week trading below the steepest of its (three) uptrend lines before the bounce on Friday. It also trespassed just below its shorter-term (20 week) moving average before this upmove. For the levels of the 20 and 40 week moving averages, and a better look at the Gold bull market as a whole (which is still perfectly intact, have a look at the longer-term weekly chart
The potentially BIG development is on the point and figure chart, in the form of a double bottom at $US 399. Take a look at the previous correction which bottomed in October 2003. The first sign of solid support in that correction was also a double bottom. And please note, the present double bottom has developed right on the steepest uptrend line on the chart. This is solid technical evidence that Gold has found support.
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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As shown by the charts discussed above, the $US 400 level for Gold is holding. Unlike last week, we now have solid technical evidence that it is firming as support. Please note this carefully. A support level on a chart, no matter how strong it is technically, is NOT a "guarantee" that the item being charted will not go lower. This is especially true for Gold, which is one of the few "investments" which governments do NOT want to see prosper.
It is, however, significant that Gold has held $US 400, especially as the Dollar weakened again in the lead up to the G-7 meeting and especially as a January US employment report gave Wall Street "confidence" that the Fed would not raise rates anytime soon. The rest of the world doesn't think the Fed will act either - THAT'S WHY GOLD WENT UP AND THE DOLLAR WENT DOWN ON FEBRUARY 6.
The Fed and the Treasury do NOT want to have to act to support the Dollar. They want the rest of the world to keep on supporting it for them. That's what this G-7 meeting is all about. If the US cannot get its way, and the EU has NOT come to the party by lowering their interest rates, then a resurgence of Gold, possibly a violent one, is just a matter of time.