Gold moved back above $US 400 this week, for two days, closing at $US 400.70 on August 9 and at exactly $US 400.00 on August 10 on a spot future basis. August 10 was, of course, the day when the Fed announced a second 0.25% rate hike, pushing the Fed Funds rate up to a still derisory 1.50%. US stock markets rose on the day, as did the US Dollar.
On August 11, the Treasury announced a larger than expected $US 69 Billion government deficit for the month of July. Gold fell $US 4.50 on the day, the US Dollar inched a little higher, and stock markets barely moved.
Then came August 11 and another data debacle. The June trade deficit was announced at $US 55.8 Billion, a rise of 19.1% over the May deficit and almost $US 10 Billion above market expectations. Gold rebounded $US 4.60 while the $US index relapsed again.
And throughout the week, the oil price just kept on rising and Rising and RISING. By August 13, spot future crude had hit a new all time high of $US 46.58 a barrel. To put this in perspective, back on April 1 when Gold hit its 2004 high of $US 427.80 (spot future closing basis), Oil closed at $US 34.27 a barrel. Since then, Gold is down 6.76% in US Dollar terms while Oil is up 35.92%.
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, the lows keep getting slightly higher since the most recent "bottom" was reached in late July. As you can see, Gold has jumped back above its moving average for the second week in a row in Friday trading. More encouraging, the shorter-term (10 day) moving average (MA) is about to cross back above the longer-term (20 day) MA.
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. This week, and for the second week in a row, Gold has jumped back up to touch its longer term moving average on the last day of the week. Last week, it was a $US 7.60 upmove. This week, Gold was up $US 4.60 on the Friday. The chart as a whole is making it more and more obvious that $US 400 has become the new "line in the sand" drawn by the financial authorities.
The upmove on August 13 has turned the point and figure chart back up again, this time above the uptrend (green) line. Time will tell if the small penetration of the line during the previous downmove was an aberration, that will be unresolved until Gold moves up past its previous high in the recovery - the $US 408 level set in mid July, just before Mr Greenspan's Congressional testimony
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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Every week, a new OFFICIAL figure comes out which debunks the rosy scenario which the financial and political powers that be in the US are trying to paint regarding the US economy. Economic "growth" and job creation have been reported well below "expectations while budget and trade deficits have been reported at well above "expectations" - and all of this since the end of July.
The financial platitudes are falling on increasingly incredulous ears. As reported in the International Herald Tribune and based on a recent study by the Century Foundation: A US family with two earners today actually has less discretionary income, after fixed costs like medical insurance and mortgage payments are accounted for, than did a family with only one breadwinner in the 1970s.
Please remember, if you were not there or too young to really experience it, that interest rates in the 1970s, especially in the late 1970s, were HUGELY higher than they are now. In the US and the rest of the English speaking nations in particular, the citizens are right out to the end of their financial tether, slowly sinking under a mountain of debt.
Gold has not sustained itself above the $US 400 level since it first climbed back to it in December 2003. The longer it does not do so, the more chance their is of accumulating it comparatively cheap (see the comparison between Gold and oil prices above). By any rational estimation of the financial/economic situation, Gold is HUGELY "underpriced" in terms of ALL paper currencies. We watch, and wait.