On April 1, spot future Gold traded above the $US 430 level on an intraday basis for the first time this year, and the first time since 1991. It also had two spot future closes above its previous 2004 high of $US 426.80 set on January 9 - spot future Gold closed at $US 427.30 on March 31 and at $US 427.80 on April 1.
Then came April 2 and the US jobs report for March. The government announced the creation of 308,000 new jobs, the first net gain in new jobs for a LONG time. At the same time, they announced that the US unemployment rate had RISEN from 5.6% in January/February to 5.7% in March. It seems that more Americans started looking for work again and thereby became "eligible" to be counted amongst the ranks of the unemployed. In the US, as in many other countries (including Australia), if you are not looking for work, you are not "officallly" unemployed.
As you know, the markets reacted instantly and they looked at nothing but the "jobs creation" figure. The $US index rallied strongly as, to a lesser extent, did US and world stock markets. Gold fell $US 11.50 on an intraday basis on April 2 before closing down $US 6.20 to $US 421.60. Spot future Silver gyrated even more spectacularly over a $US 0.37 intraday range before closing actually UP one cent to a new 17 year high of $US 8.15.
Over the week, Gold was down $US 0.60 while Silver rose $US 0.45 - or 5.8%.
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 comparatively big reaction to the US employment numbers on the April 2 "bar" on the chart. For the first time since Gold's latest run above $US 400 began on March 16, the chart has dipped below its shorter-term (10 day) moving average on an intraday basis. The close on April 2, however, was above the MA. On this chart, Gold has stalled at its first attempt to break decisively above its January 2004 highs. We still await a spot future CLOSE substantially above the $US 430 level.
On the weekly bar chart shows the position succinctly. Gold hardly moved on a week to week basis after pressing above its previous 2004 high, but not far enough above it to be decisive, not yet anyway. You can see the spot future intraday highs for January and April on the longer-term bar chart. A $US 4.00 difference ($US 428 in January - $US 432 so far on March 31) "should" be enough. We'll see.
On the point and figure chart, Gold has been crossing and recrossing the steepest of it uptrend lines for the past two weeks. This week, it poked one "X" (don't forget, this chart is plotted on CLOSING prices) above its January high but then corrected. Last week we stated that a close of $US 429 or higher (spot closing basis) would signal the END of the correction and the start of the next upleg on the $US Gold bull. We didn't get it. Now, spot future Gold must close ABOVE the $US 430 level to give us that signal.
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 you know, Silver has taken off. In the three weeks since Gold broke back above the $US 400 level on March 16, the spot future price has increased exactly $US 1.00 or 14%. Over the same period, Gold is up 4.7% in $US terms. Even more to the point, so far in 2004, Silver is up 36.74% in $US terms. Gold is up 1.32% in $US terms in 2004 so far. The "suppression order" on Gold is still out - BIG TIME.
Why? Very simple. The Fed has "promised" that they will be patient with US interest rates, a message which has been translated by almost everyone to mean that they will not be raising the present 1.0% Fed Funds rate until after the November elections at the soonest. Some of the more starry-eyed pundits on Wall Street have opined that the Fed will keep rates at their present levels until late 2005 or even well into 2006.
Inside the US, the price of almost everything that Americans have to buy, and more and more of the things they want to buy, is accelerating upwards and has been doing so since before the start of this year. Yet the government and the Fed are still getting away (on the surface) with claiming that price inflation is well under control.
Their message is wearing thin, but has not yet broken. $US 2.00 a gallon gas hasn't done it. Huge increases in government imposts and charges of all descriptions haven't done it. Not even $US 8.00 plus Silver has done it. But $US 440 - 460 - 480 - 500 - ... Gold WOULD do it. Nobody would continue to swallow the line that inflation is "under control" if Gold broke free. And if (when) Gold does break free, the Fed will have the "choice" of raising rates substantially or watching their Federal Reserve Notes (Dollars) fall off a cliff. The stakes are GIGANTIC.