"If you want to know why spot future Gold traded at or above the $US 412 level on both September 23 and 24, only to close at $US 411 on Setember 23 and fall back to close the week at $US 408.10 on September 24, take a look at the $US 1 x 3 point and figure chart.".
(Gold This Week - September 24, 2004)
See the dotted red line anchored in Gold's $US 427.80 2004 spot future high closing level of April 1? Last week, Gold was challenging that line. This week, specifically with the $Us 5.70 rise to $US 418.70 on September 30, Gold decisively broke above the line. Last week, the highest spot future Gold close since April 2004 remained the $US 413.20 close set on August 20. This week, with spot future Gold closing at $US 419.50 on October 1, the line has been decisively broken.
"A Gold spot future close above $US 413, and especially one above $US 416, would reaffirm the higher-highs higher-lows of the gradual recovery of the Gold bull market, a recovery which has been going since the May 2004 lows."
(Gold This Week - September 24, 2004)
That is exactly what has happened this week, and it is even more significant since it occurred during the week of the G-7 meeting, the week of the first Presidential debate, and the week of the first ever $US 50 plus spot future close on the oil price. This week, the financial powers that be had many very good reasons to hold the $US Gold price down. They may have tried. They did not succeed.
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 chart, the shorter-term 10 day moving average (MA) moved back above the longer-term 20 day MA last week. This week, Gold has broken out above a five-week $US 400-410 trading range to hit its highest level in almost six months and put Gold in $US terms back in the "black" for 2004.
On the weekly chart, Gold has broken above the $US 400 - 410 trading range it traded in over the five weeks to September 24. It has confirmed the pattern of higher lows and higher highs set since Gold's 2004 lows set back in May. And the shorter-term (20 week) MA is curving quickly back up towards the longer-term (40 week). A crossover of these averages, shorter-term back above longer-term would be a definite signal towards another upleg in Gold's bull market - that is - a successful challenge to the April 1 spot future 2004 closing high of $US 427.80. Given another week like the one just ended, the challenge may come even before the crossover can take place.
You can see the "higher lows - higher highs" pattern reflected in the point and figure chart too. To establish a new upleg on the post 2001 $US Gold bull market on this chart, Gold needs a spot future close of $US 430 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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Despite all the political headwinds in its path - G-7 meeting, upcoming IMF/World Bank meeting, US Presidential election - Gold in $US terms has broken out of the doldrums and is within 2% of its 2004 highs. What this week has given us is yet another confirmation of the post May 2003 "recovery" of the $US Gold price. What we do not yet have is a reconfirmation of the post 2001 $US Gold bull market. For that we need a decisive new 2004 spot future closing high and for that we need a spot future close of $US 430 or higher.
The first Presidential debate which took place on September 30 was on "foreign policy". It will be interesting to see what happens when the debate on US domestic economic and fiscal policy comes up. Had Mr Kerry chosen to tear Mr Bush to shreds on his foreign policy, he could certainly have done so. He did not choose to do so. If anything, he has even more potential ammunition to fire against Mr Bush's domestic policies. It wil be interesting to see how much, if any, he chooses to make use of.
Meanwhile, in the midst of many political imperatives to the contrary, Gold has had a very good week this week. If you cast your mind back to last year, Gold had a big three month run over the last quarter of the year which raised it from just under $US 370 in early October to nearly $US 420 by the end of the year. Financially, the circumstances are worse now than they were then. Let's see what happens.