The last time we updated this page was on February 20. On that day, spot future Gold fell $US 12.30 to $US 397.50 and the $US index soared 1.36 points to 87.40. After our enforced "holiday" - melted phone lines will do that to you - Gold has closed up $US 8.40 to $US 401.30 on March 5 with the $US index sliding 0.99 to 88.23.
Both Gold and the $US are slightly higher than they were two weeks ago, but now as opposed to then, Gold is rising and the $US is falling.
Two weeks ago, we gave a tongue in cheek G-7 definition of "volatility":
"As the old saying goes, actions speak louder than words. 'Volatility', in the context used by the G-7, is a euphemism for a single FALLING currency, and that currency is the US Dollar. A rapidly CLIMBING US Dollar is, of course, not seen as being 'volatile'. Conversely, 'volatily' in the context of Gold is a euphemism for a rapidly climbing $US Gold price. A rapidly FALLING $US Gold price is anything but 'volatile'."
Unfortunately, for the financial powers that be at any rate, "volatility" reared its ugly head once more on March 5 with the big fall on the $US index and the big rise of the $US Gold price. Silver is even more "volatile". On March 5, the spot future Silver price soared $US 0.22 (3.25%) to a new multi-year high close of $US 6.98. To put this in perspective, when spot future Gold hit its 2004 high close of $US 426.80 on January 9, spot future Silver closed on the day at $US 6.49. Now, Gold is 5.98% below its January 9 close while Silver is 7.55% ABOVE its January 9 close. This can't last. Either Silver has to break down or Gold has to break UP - soon.
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, you can see the solid support level at or about the $US 390 level. The shorter-term (10 day) moving average is still well below the longer-term (20 day) one after a short cross on Gold's rebound from its first foray below $US 400. The $US 8.40 leap on March 5 has put the price back comfortably above the short term MA.
On the weekly bar chart, Gold trespassed below its steepest uptrend line when it fell below $US 390 on an intraday basis on March 3. It is now back above that trendline and has closed near its high for the week and back just below the shorter-term (20 week) moving average.
On the point and figure chart, Gold penetrated below the second of its uptrend line earlier this week when it closed in the low $US 390s before rebounding at the end of the week. We have added a downtrend line connecting the last two Gold peaks. On this chart, Gold must break above that line (the red dotted line) which currently stands at about $US 408 to give solid evidence of renewed strength. On the downside, support stands between $US 390-95.
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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Can you name another basic "commodity" whose price expressed in $US terms is actually DOWN from where it was at the start of this year? Neither can we. Gold stands pretty well alone in this regard. Silver, for example, is up $US 1.02 or 17.1% so far in 2004. Gold is down $US 14.80 or 3.6%. That can't last, and on ALL the economic/financial evidence, Gold should be catching up with Silver and the rest of the $US priced "commodities" in the near future.
The Treasury and the Fed no longer want to talk about US "price inflation". The Producer Price Index has been delayed for two months in row. Everybody in the US knows that prices have skyrocketed almost across the board, the only ones which haven't - yet - are the prices for consumer goods made in China, which is still pegging its currency to the $US.
Gold's importance as a MONETARY metal is directly proportional to the distortion of its price in paper money terms, specifically in global reserve currency paper money terms. This distortion has been acute for a year, as Gold has risen only against the $US and currencies pegged to the $US ever since the end of the Iraq war almost a year ago. Since the start of this year, and the quantum leap in the $US price of all basic industrial commodities, the distortion of the Gold price has become grotesque. As SOON as the $US is seen to be faltering again, the $US Gold price will break loose. Stay tuned.