Last week (August 9-13), Gold sneaked back just above the $US 400 at the start of the week only to retreat to the mid $US 390s and close the week just below $US 400 at $US 398.90. This week, Gold has moved above $US 400 and then $US 410 to close the week at $US 413.20, its highest spot future close in over four months, since April 12 to be exact. In fact, Friday's close was Gold's first spot future close above $US 410 since April 12.
In sharp contrast to the previous two weeks, there were no government number debacles this week, no growth figures below expectation, no employment numbers below expectations, and no record monthly trade deficits. The only "number debacle" (besides the rising $US Gold price, of course) was a $US oil price which hit an all time high close of $US 48.70 on August 19.
So, Gold is at a four month high in $US terms. Not only that, but it was up substantially in terms of ALL major currencies this week, always a good indicator for a possible sustained rally or even new bull market leg. To keep things in perspective, though, it must be remembered that Gold began 2004 at $US 416.10. It is still in the "red" in US terms, but now only just in the red.
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 $US 300 barrier to stay in March 2002 was a "sea change" for world markets, a glance at the percentages in this table should settle the matter beyond all reasonable doubt.
On the daily bar chart, which goes back to the end of May, you can see that Gold is now at its highest level on the chart, having decisively broken above the previous high ($US 408.40 on this chart) set in mid July. The shorter-term (10 day) moving average (MA) has crossed back above the longer-term (20 day) MA. These two items alone constitute a definite "buy signal" on this chart.
On the weekly chart, the price has now jumped decisively above both (20 and 40 week) moving averages. The last three Fridays in a row have seen significant upmoves - up $US 7.60 on August 6, $US 4.50 on August 13, and now $US 6.10 on August 20. This time, however, Gold is up substantially in $US terms despite the fact that the $US index ROSE both on the Friday and over the week as a whole. Gold is moving against ALL currencies, not just the $US as has been the case recently. The $US 400 "line in the sand" drawn by the US monetary "authorities" has been pretty decisively penetrated.
The point and figure chart looks excellent, having traced out an unbroken series of higher lows and now higher highs ever since Gold hit its 2004 lows back in mid May. The uptrend (green) line which was penetrated slightly when Gold dipped below $US 390 in late June has now been decisively re-confirmed. All that remains is resistance at the 2004 highs in the mid $US 420s.
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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Just over a month ago, Mr Greenspan came up with the rosiest of rosy scenario regarding the future of the US economy. Since then, every financial statistic has refuted him. Treasurer Snow is now complaining about "flagging" global economic growth and its effect on the US trade deficit while defending the US Dollar's status as the world's reserve currency by claiming that record foreign ownership of US debt is a "healthy" situation. Meanwhile, oil is mounting an assault on the $US 50 a barrel level while US government debt closes inexorably on the Treasury's debt "ceiling" of $US 7.384 TRILLION.
The surprising part of the equation is not that Gold is now moving back towards the level at which it started the year, it is that Gold is not yet setting new 2004 highs and indeed pushing towards highs last seen in the heady days of the end of the 1970s. The parallels with the 1970s and today are as numerous as they are obvious. The major difference is the HUGELY bloated $US debt pile now compared to then.
Gold was up $US 14.30 this week, having halved the distance to its 2004 high ($US 427.80 spot future close set on April 1). There are many reasons to expect a challenge to that 2004 high in the near future. Asian demand is VERY strong, and Asian demand is seldom if ever strong when Gold is at or near a short or medium-term top. Evidence of a global economic slowdown is gathering by the day. Any oil price above the $US 50 level will trigger the conclusion amongst many traders that a replay of the 1970s is becoming inevitable. And the $US is being held up by little more than jawbone and wishful thinking.
One last point, and it's a big one. Take a look at Gold's long-term $US 5 x 3 point and figure chart. Any spot future Gold close of $US 440 or higher would confirm the green uptrend line on the chart. This, if (when) it occurs, will be the very FINAL confirmation of the real beginning of a LONG TERM Gold bull market in $US terms.