After big upward moves in $US terms in three of the last four weeks, $US Gold did little this week. That was due to the $US 6.10 fall on Tuesday July 13. Gold spent the rest of the week slowly but surely getting that back. The Tuesday fall was on the back of a June US trade deficit figure which was merely the THIRD largest in history at $US 46 Billion, down from the $US 48.1 Billion deficit in May which was the largest in history.
Wall Street specialises in clutching at straws these days, and the "lower" trade deficit was all that was needed for the talk to re-emerge about a higher US Dollar - and of course a lower US Dollar Gold price.
In the lead up to the Fed's rate rise on June 30, all the talk on Wall Street was about how the rise would "strengthen" the Dollar. When that didn't happen, there was a temporary silence while the financial "gurus" cast about for something else which would "raise" the US Dollar. On Tuesday, with the deficit number actually down, they grabbed at it. Unfortunately, the announcement of the June deficit number was merely a "blip", the $US Index rose 0.36 points on the day. By the end of the week, the $US index was hitting new post February lows, down 0.90 on the day to 87.30.
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:
|
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.
Last week, 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. This week, with the exception of the $US 6.20 fall on July 13, the pace has been much calmer as you can see on the chart. Gold spent the entire week closing 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. And as you can see, Gold has closed above both averages for the second week in a row. In fact this week, Gold spent the entire week above those converging averages, the first time that has happened since back in April.
The point and figure chart is "choppy" but it keeps making higher highs and higher lows, a prerequisite for an uptrend. Please note that the $Us 6.20 fall on July 13 produced a correction on the chart which only went down to the first support point. By the end of the week, the chart had turned up again. Now, what is needed is a rise to 3 "X"s above the previous high in this recovery - that's a close of $US 411 or higher.
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:
|
The technical "tightness" of the $US Gold price at present is best illustrated on the weekly chart where the 100 and 200 day moving averages have converged right at the $US 400 level. Right now, the longer-term (40 week) moving average is about $US 1.00 above the shorter-term (20 week) average. If Gold can keep moving up (in however "zigzag" a fashion) in $US terms, the situation will inevitably reverse and the shorter-term average head back above the longer-term one. It is the resolution of this formation we are now awaiting.