For the first four days of this week (August 2-5), Gold didn't do much of anything. Then came Friday, and a shock to the system in the form of a July employment report in which the actual new jobs (32,000) were not much more than 10% of the expected figure (228,000) Gold leaped - in $US terms that is - as the $US dived. Very pretty on the $US charts shown here, but not yet a real sign of a resurgence. On August 6, for example, Gold was up a mere 0.50 in Euro terms.
On July 19, the day before Mr Greenspan started his two days of Congressional testimony, the $US index closed at 87.35. By the time Mr Greenspan finished his testimony two days later, the $US index had leaped to 88.77. It continued to climb, closing as high as 90.14 on July 29. Then came the announcement of "only" 3.0% US growth in the second quarter and the $US index stopped going up. Then, on August 6, came the shocking July employment number, and the $US swooned 1.32 points to 88.46.
Mr Greenspan's testimony, the fundamental aim of which was clearly to prop up the Dollar, produced a 2.79 point rise in the $US index. With almost all of the damage having been done on August 6, the index has now given back 1.68 points or 60% of that gain. Inconveniently, for Mr Greenspan, reality has intervened once again.
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, Gold has jumped back above both 10 and 20 day moving averages with its $US 7.50 leap on August 6. It has also climbed back above the $US 400 level intraday and closed for the week just shy of that level. There is a lot of resistance between present levels and about $US 410 - a close above $US 410 is required to restart Gold's upward progression on this chart.
The most important feature on the weekly chart is the fact that the 40 week moving average (MA) is firmly above the 20 week moving average - you can see this more clearly, and get the relevant numbers - on the longer-term weekly chart. The August 6 upmove has pushed Gold back above its 20 week MA but not yet back to its more important longer-term 40 week MA. Again, you can see that a level above $US 410 is neccesary before Gold can mount any challenge to its February/April 2004 highs in the high $Us 420s (spot future closing price basis).
The point and figure chart has keeled over from its distribution zone in the mid $US 400s and has slid all the way back down to just below the uptrend line. With the $US 4.00 gain on Friday, the chart has turned up again and now rests just below the line.
The biggest change in the point and figure chart is the simple fact that with the rise on August 6, Gold is once again well above its uptrend line. It would be unusual, but by no means unprecedented, for this chart to recoup all of its recent downmove and gain new highs without some further distribution. On this chart, a move above $US 410 in the absence of any more distribution would be a sign of drastic increase in upside strength. We'll wait and see.
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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On US stock markets, the SP500 and the Nasdaq have definitely broken down. The Dow is on the verge of breaking down on a long-term basis. Any close below 9800 would do it and the Dow closed on August 6 down 147 points to 9815. Mr Greenspan's credibility is in ashes by any rational standard, and the resumption of the downmove on the $US index shows this clearly.
The prospect of HUGE financial disruptions, especially huge US financial disruptions, coming in a Presidential election year is held to be almost impossible. Yet there are precedents. Two which come immediately to mind are the elections of 1932 and 1980. The financial situation is certainly geared towards another one in 2004, and that being the case, the efforts of both the US political and financial establishment to prevent it are sure to know no bounds.
Gold has had a good one day climb, against the US Dollar only. It has not yet regained its long-term (40 week) moving average. It is true that in any rational economic situation, Gold would be FAR higher in $US terms than it actually is, that just shows the TRUE seriousness of the situation. Watch for a close above $US 400 and then above $US 410. If, as is certainly possible, we get both in the coming week, we could be off to the races. Stay tuned.