Last Friday (March 5) spot future $US Gold had closed at $US 401.30. Despite the currency and stock market fluctuations of this past week, and the terrorist atrocity in Madrid which took place on March 11, Gold did almost nothing at all. It closed on a spot future basis at $US 401.00 on Thursday, March 11.
Then came "the day after" the Madrid bombing on March 12. US stock markets recovered some of their big losses of the previous two days. The $US index turned around an 0.44 point fall of the previous day by rising 0.60 points to 89.09, only 0.13 points below its 2004 high set on March 4. And Gold duly slid back below the $US 400 level, falling $US 5.40 on the Comex to close for the week at $US 395.60.
"Miraculously", given the gyrations of the US Dollar over the period, Gold in US Dollar terms has been locked in a trading range of a few Dollars each side of the $US 400 level for the past three weeks. It would seem that a number of lines are being drawn in the financial sand. There is the low 85 point level on the $US index, the 10000 level on the Dow, the 1.00% rate for the Fed Funds, and the $US 400 level for Gold. It will be hard to keep all these intact between now and the US elections in November, but an effort is clearly going to be made to do so.
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.
The notable change in the table above is that the Dow is now back BELOW its level of March 27, 2002, when the $US Gold price finally broke above $US 300 to stay.
On the daily bar chart, you can see the solid support level remains at or about the $US 390 level. After a week of being "sandwiched" between the shorter-term (10 day) moving average and the longer-term (20 day) one, $US Gold broke back below both averages with its fall on March 12. This chart has been going essentially sideways ever since Gold broke back below the $US 400 level on February 20.
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. Since then, it has essentially been following that trendline, closing just below it for the week with the $US 5.40 fall on March 12.
On the point and figure chart, Gold is in the process of pushing sideways through its two steepest uptrend lines. On this chart, the obvious support point is the recent low close of $US 393 ($US 392.70 on March 3). Any spot future Gold close below the $US 390 level would be a signal of further weakness, with the next support point being at or about the $US 380 level (see the $US 2 x 3 point and figure chart). On the upside, the dotted red line which connects Gold's two peaks earlier this year currently stands at about $US 406. This is the first resistance point on the chart.
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 action on the $US Gold price over the past month or so has forcibly reminded us of what happened back in early 1979 when Gold was struggling just below the $US 250 level for a while. Then as now, Gold had been going up against the $US but, due to $US weakness, Gold's rise against other major currencies was much more subdued.
Back then, Gold's movements in early 1979 were a precursor to the REAL Gold bull market. Once Gold broke above $US 250, it started rising in terms of ALL currencies. The result was the historic bull which took Gold from $US 250 in late April 1979 to $US 850 in January 1980.
This time, Gold's REAL bull market still awaits that final feature, Gold going up against ALL currencies, not just the US Dollar. There are increasing signs that this event is coming closer see our main Gold commentary this week, if you have not already done so.
Whether Gold's REAL bull market takes off from present levels just below $US 400, or whether Gold will go lower and test $US 380, will be irrelevant in the bigger picture down the road. For now, we can only wait and see where SOLID $US Gold support emerges, and what happens after that.