It has now been just over a week since Mr Bush's acceptance speech at the Republican Convention. The delegates have dispersed, as have the protesters, and the US Congress is again in session, a session scheduled to last until the end of September. We are now firmly placed at the "business end" of the US Presidential election campaign.
In lock step with this, markets not merely in the US but all over the world have gone into what could be described as "holding patterns". A partial exception to this would be the $US oil price, which has spent the past three weeks or so bouncing fairly dramatically in a tight $US 42 - 45 trading range. The range is tight but the "bounces" have been dramatic. On September 9, for example, the spot future oil price jumped $US 1.84 - only to dive by $US 1.80 the very next day.
Last week (August 30 - Sept. 3), Gold fell a bit - down $US 2.30 on the week. This week (Sept. 7 - 10), Gold fell below the $US 400 level before turning upward and closing the week on September 10 with a $US 3.40 rise to $US 402.30. As you can see on the weekly bar chart, Gold was up a mere $US 1.30 for the week. Over the past two weeks, Gold in $US terms has barely moved.
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 spent the week below both its 10 and 20 day moving averages (MA) before bouncing up to touch the shorter-term MA on September 10. You can also see that the shorter-term MA has once again dipped below the longer-term MA, the second time this has happened since July.
On the weekly chart, you can see that Gold fell just below the bottom of the $US 400 - 410 trading range it has been tracing out over the past month weeks before regaining the range by the end of the week. This week. Gold bounced off the shorter-term (10 week) moving average (MA) to end the week just below the 20 week MA.
The point and figure chart shows two failed attempts to break decisively above the $US 410 level, followed by yet another bounce from the uptrend line - the fourth since the retreat from the April 2004 highs. The further "sideways" this chart moves, the higher that uptrend line will get. It is now almost exactly at the $US 400 level.
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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The clamp being put on any important or indeed rational financial and/or economic debate (a pre-requisite for any modern election campaign) has now locked most world markets into "holding patterns". We use this term advisedly. Neither of the major US candidates want to see any MAJOR financial ructions between now and November 2 - domestic financial and economic issues is an area which both candidates want to talk about. What they DON'T want to talk about, however, is any fundamental issue involving the domestic economic scene. A ruction on the markets would make such a discussion more difficult to avoid - hence the holding patterns.
This being the case, it follows that any attempt to address the real economic issues will be placed in the "too hard" basket, there to lie in wait for the period AFTER November 2. Even if the US political establishment is successful in keeping things on an even keel for the campaign, November 2 is now less than two months away. And the more the real situation is suppressed now, the higher the potential for some, most, or ALL the wheels to fall off after November 2.