We got a $US 10.50 jump in the spot future Gold closing price on June 17-18. We got another jump $US 8.20, on June 24. And this week, Gold positively bounded upward by $US 15.20 over July 7-8. Much more of this and we will have to start thinking that a "trend" is forming here.
As you can see on the charts, indeed it is. And as you can see by the numbers in the preceding paragraph, $US Gold is now travelling upward in ever larger increments. Most telling of all, of course, is the big leap this week, the first full week AFTER the Fed raised official US rates for the first time in four years.
If this were not a US election year, most people think that the Fed would have started to raise rates earlier than they have. And having seen the Fed raise rates at the end of last month, almost everyone would be expecting another rise at the next FOMC meeting on August 10 - if this was not an election year.
Since it IS an election year, most expect the Fed to tread as softly as they possibly can until November. And here lies the problem, for those whose future "horizon" extends further than four months. The expectation is growing slowly that if the Fed does "tread softly" until November, they will have to play "catch up" AFTER November. November is not far away now.
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.
As you can see on the daily bar chart, it has been a fairly wild week. In fact, Gold soared from a intraday low of $US 389.00 to an intraday high of $US 409.60 - that's just over $US 20.00 - between July 6 and 8. The chart is now at its highest levels since it hit its early May lows with the price comfortably above both (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. On the longer-term chart, the longer-term average is now above the shorter-term average - the crossing point being about $US 399. The difference is that last week the price was just below that crossing point. This week, it is well above it and above both moving averages.
Here's what we said about the point and figure chart last week: "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." Gold is now above $US 406, but it did not get there without another downturn first - the $US 5.70 fall on July 6.
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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Last week, we pointed out 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. We stated that Gold would HAVE to get back above $US 400 "soon" to negate this "bear signal". Gold did get back above $US 400 and continued to rise to a high in its post May 2004 recovery.
It is clear that the US Dollar is again weakening, contrary to the expectations of most "mainstream analysts" in the lead up to the Fed rate rise. It is clear that the Gold price is getting more volatile. And it is clear that for three of the last four weeks (see Gold This Week) Gold has been rising against ALL major currencies, just as it was in late March.
This rising against all paper currencies is the prerequisite for a genuine GLOBAL Gold bull market. The longer the performance of Gold over the last month continues, the more likely it is that we ARE in that GLOBAL bull market.
At present exchange rates, a new bull market high for Gold in $US terms would not translate to a new bull market high in terms of Euros or Yen or Pounds or Canadian or Aussie Dollars or South African Rand etc.. If Gold keeps going up faster than the Dollar is going down, we will get new highs in terms of ALL these currencies. And by the time that happens, Gold will be a LOT higher in $US terms.