Last week, spot future Gold closed on Friday, February 6 at $US 403.60. By early trading on Friday, February 13, spot future Gold was trading at $US 416. Then, a large $US order was put through the currency markets by a European bank, the Dollar staged an instant recovery, and Gold fell away from its highs earlier in the day to close for the week at $US 410.30.
The correction in Gold since January saw the spot future closing price fall from $US 426.80 on January 9 to $US 398.10 on February 5. At the close of $US 410.30 on February 13, 42.5% of that correction has now been recovered. Not bad, one might say, until one considers that the $US has now given back ALL the gains it made during that Gold correction. The $US index had broken below the 85.00 level for the first time this year in early trading on February 13 before rebounding on the same European bank $US buy which turned Gold's early gains on the day into a loss on the close.
Silver too, before a slight loss on February 13, had recovered ALL the losses it made in its recent correction. Gold is lagging - badly - hardly surprising given the fact that the world has just passed through a solid month of financial conclaves all designed to reassure the world about the "solidity" of the global monetary system still underpinned by the US Dollar.
Gold is lagging, but it still had a reasonably good week in $US terms. In terms of other major currencies not tied to the Dollar it barely managed to hold its own. It must be emphasised on a regular basis, since the Gold correction of March/April 2003 - which took place in terms of ALL currencies - Gold has resumed its bull market only in US Dollar terms. In terms of the other major currencies, it has been trading sideways.
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 the daily bar chart, Gold has broken back above both its (10 and 20 day) moving averages. It clearly found support just below the $US 400 level and now looks to be forming what is called a "reverse" head and shoulders formation. Technically, a head and shoulders formation points to lower prices ahead. A "reverse" head and shoulders points to the reverse.
On the weekly bar chart, Gold has bounced back above the steepest of its (three) uptrend lines. After falling just below its shorter-term (20 week) moving average last week, it is back well above it again.
This is what we said about the point and figure Gold chart last week:
"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."
As you can see on the chart, that double bottom at $US 399 WAS support. What remains to be seen now is how long it takes Gold to regain and surpass its previous highs. Last time, it took a little over six weeks.
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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"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."
(The Gold Bull Market This Week - February 6)
The Fed and Treasury have certainly NOT acted to support the Dollar. There are now rumours, however, that the European Central Bank HAS. These rumours have NOT been confirmed, we merely know that a "large" European Bank stepped into the currency markets with perfect timing on February 13 and sold 2 Billion Euros for US Dollars. Had that not happened, there is no telling where Gold would have closed the week, it was trading at $US 416 before the "sudden" sale of Euros for Gold.
Technically, $US Gold has found solid support at the $US 400 level and has now retraced nearly half its correction. Globally, we still await the re-commencement of a Gold bull market in terms of other major currencies. As long as the $US Gold price can be held in check and as long as the $US continues to weaken on world currency markets, this situation will continue.