We got a $US 10.50 jump in the spot future Gold closing price on June 17-18. We got another jump, this time of $US 8.20, on June 24. Then came this week, the week of the FOMC meeting. On June 29, the first day of the meeting, the day before the decision on US rates was to be announced, spot future Comex Gold fell $US 8.50 - sliding back below the $Us 400 level in the process AND back below its 200-day moving average.
The "reasons" given for this Gold slide was the anticipation of a "stronger" US Dollar when the Fed duly announced the rate rise on June 30 (see Gold This Week for more on this. The Dollar did not rise, it fell, and Gold spent the rest of the week recovering about 70% of that June 29 fall.
The four year era of ever lower official US rates is now over. We know of only one time in its history when the Fed raised rates only once before continuing with a regime of lower rates. That "anomaly" was an 0.25% rise (to 5.50%) on March 25, 1997 - about three months after Mr Greenspan made his famous "irrational exuberance" speech of December 1996.
On all other occasions, the first rate rise has been one of a series. Here are the last two instances of multiple Fed rate rises:
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 clearly see Gold's "preparation" for the FOMC announcement on June 29 - it's the gap down day on the chart. You can also see that it was a "one day wonder" and Gold recovered most of the fall by the end of the week. Note also the fact that Gold closed the week back above both its (10 and 20 day) moving averages.
The most important feature on the weekly chart is the fact that the 20 and 40 week moving averages have now converged. You can see this with the data on the longer-term chart. Note that the longer-term average is now just above the shorter-term average - the first time since 2001 that this has happened. Note also that the spot future close on July 2 was almost exactly at the crossing point of these averages.
The point and figure chart shows the downturn caused by the $US 8.50 fall on June 29 and the subsequent upwards reversal. On its previous upmove, Gold got to $US 403 on this chart. It would be a distinct sign of strength if the present upmove can go higher, particularly if it can reach $US 406 or higher without another downturn. Conversely, another downturn below the $US 406 level would indicate a longer "consolidation" period and a possible retesting of the uptrend line - the green line 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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Please note again the significance of the longer-term (200 day or 40 week) moving average crossing below the shorter-term (100 day or 20 week) moving average on the weekly Gold chart. This is an event which has not happened since Gold was in the VERY early stages of its $US bull market in mid 2001. The financial "powers that be" are acutely aware that technically, this is a "bear signal". They may well attempt to keep the price below these averages in the hope of inducing a burst of technical selling.
Right now, the averages have crossed over at the $US 398 level and the spot future price is just above that, having closed on July 2 at $US 398.70. This means that to negate this "bear signal" and get the shorter-term average back above the longer-term average, Gold HAS to regain the $Us 400 level and to rise back towards its April 1 highs (around $US 428 on a spot future closing basis) from there.
In rational economic and financial terms, the Fed rate hike makes such an outcome even more to be expected than it was before. Because of that, and in terms of "political economy" as it is practiced nowadays, it makes it even more important that the $US Gold price be held down.
We cannot know if "politics" will once again get the upper hand on "economics" and if it does, how long the situation will last. We can and DO know two things. First, the distortion of the true situation involved in forcing the $US Gold price down in current circumstances is VERY dangerous for the financial powers that be. Any temporary reprieve comes at the risk of an even more violent snap back. We also know that if they are successful (however temporarily) in holding the $US Gold price down and even forcing it lower, Gold becomes even more of a "bargain than it already is.
Finally, take another look at the longer-term weekly bar chart and note that there are still TWO major uptrend lines underneath the current action. Even if Gold falls temporarily, it will NOT negate the post 2001 bull market.