Last week, we had a three day sojourn in which the spot future Gold price dipped below the $US 400 level. This week, Gold has inched back above $US 400 and ended in the middle of the $US 400 - $US 412 range in which it has been for five weeks now. We said last week that the markets were "on hold". They remained so over the week of September 13-17.
Even the US election itself has swung towards an "on hold" situation, with two of the three most recent polls calling it a "tie" as it presently stands. While the rest of the world waits and hopes that the American people will repudiate the actions of their government, global financial markets don't know whether it will be better if they do, or if they don't.
Apart from the fundamental unviability of the global financial situation in general, there are two events which may "roil" the financial waters between now and November 2. One is the last FOMC meeting before the election which takes place next Tuesday (September 21). The overwhelming consensus is that the Fed will raise another 0.25% at that meeting. Any deviation from this - a raise of more than 0.25% or no raise at all - would definitely not be seen as "business as usual". The other event, which may well be postponed until after November 2, is a raising of the current Treasury "debt ceiling" of $US 7.384 TRILLION.
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 most of the week trading between its 10 and 20 day moving averages (MA) before bouncing back above both of them on September 17. The shorter-term MA has remains below the longer-term MA, the second time this has happened since July.
On the weekly chart, Gold is back in the middle of the $US 400 - 410 trading range it has been tracing out over the past five weeks. Last week, Gold dipped down to touch its longer-term (40 week) MA. This week, Gold is back above both moving averages. Any indicator of renewed strength on this chart will require a Gold close above $US 410 and preferably above $US 415.
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 pattern of higher lows and higher highs established in the wake of Gold's 2004 lows back in late April remains intact. To continue intact, Gold mist climb to a level of $US 416 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:
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In 2003, Gold hit a high in the low 380s in February. It took until November for that high to be decisively exceeded. This year, Gold hit highs around the $US 430 level in February and again at the beginning of April. This time, the climb back towards those highs has been even more sluggish. The major difference is that 2003 was not an election year and for much of it, the invasion of Iraq looked to many people like a "good" thing. 2004 IS an election year and most people have spent the year gradually waking up to what a BAD thing the invasion of Iraq is proving to be.
2003 was the year of record low US interest rates and the great rebound in world and especially US stock markets. For most of 2004, world and especially US stock markets have been frozen in place while US rates have started to inch up. All of this was the prelude to the main event, which is the US Presidential elections. We are now one trading month away from those elections, and counting.