"As we said here last week, the bottom line remains simple. Will Gold stay below its 2004 highs until November 2 or won't it? We'll know soon enough."
The Gold Bull Market Last Week - October 22
Well, the answer is NO. Spot future Gold closed at new 2004 highs twice this week. It closed at $US 429.00 on October 25 and at $US 429.40 on October 29. The old spot future high 2004 close was $US 427.80 set on April 1.
Admittedly, $US 429.40 is not very far above the old high of $US 427.80 - less than 0.4% and not enough to be decisive. And, as you can see on the daily Gold chart, Gold spent pretty well the entire week bouncing off the $US 430.00 level, a level it did exceed on an intraday level earlier this year. Having said that, the fact remains that Gold DID reach a new closing high in its post 2001 $US bull market this week - on the same day that the $US index closed below the 85.00 level for the first time in its post 2002 bear market.
The US election (next Tuesday) looks likely to descend into chaos. It has been reported that officials in Florida have "lost" 60000 absentee ballots cast by people who either wanted to avoid the rush or who could not vote on election day so voted early. And Colorado is offering a Constitutional amendment on the same ballot as the presidential vote which, if passed, would "distribute" the State's nine electoral votes to the two candidates on the basis of their percentage of the popular vote. Meanwhile, across Florida, Colorado, and the other forty-eight states, lawyers, voting "rights" advocates, and assorted other busybodies are poised to descend on the polling stations to "scrutinse" the entire process within an inch of its life.
All this, plus the avalanche of newly-registered voters (estimated to be as many as 20 million), have the potential to make what happened in 2000 (it took a month to declare a winner) pale into insignificance. For the sake of Americans in particular and the world in general, we can only hope that it doesn't happen.
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 "railroad track" is firmly intact with the two (10 and 20 day) moving averages moving smoothly up below the Gold price. Naturally, Gold is at the highest level shown on this chart - which only goes back to early August. And as already stated, Gold spent the entire week bouncing off the $US 430 level on an intraday basis.
Last week we said that: "It will be interesting to see which breaks first, the 2004 $US spot future closing Gold high or the 2004 spot future closing $US index low. Actually, the two were simultaneous. Gold set new 2004 closing highs twice this week, on October 25 and 29. On both days, the $US index set new 2004 lows.
On the weekly Gold chart, the new highs on the spot future close came two weeks after the moving average crossover - the shorter-term (20 week) MA back above longer-term (40 week) MA last week. This is an impressive showing. We now have two out of the three signals - moving average crossover and new closing highs - needed to absolutely confirm a new upleg in the Gold bull market. Now we await only a decisive new 2004 high.
Speaking of "decisive new highs", take a look at the point and figure chart. What you see here is a potential "double top". If Gold fails to close above $US 430 before falling to close at $US 426 or lower, the potential double top will become an actual double top. On the other hand, if Gold continues to move up next week and reaches a closing level of $US 432 or higher, we will have a "breakaway gap" on this chart and have confirmation of the next stage of the $US Gold bull market.
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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To really gauge the LONG TERM potential for this $US bull makret, we need to once again refer to our strategic $US 5 x 3 point and figure chart. As you can see on the chart, this is the third time this year that $US Gold has reached the $US 425 level on the chart. In February and April 2004, spot future Gold did not manage to close at $US 430 or higher. Now, it is trying again. If Gold does close at $US 430 or higher, it will break above the wide double top formed by the February/April 2004 highs. If it manages to go on to close at $US 440 or higher, it will establish a solid uptrend line on this chart for the first time since the beginning of the bull market back in March 2001.
Conversely, if Gold turns down at present levels and falls to a close of $US410 or lower, the chart would have a TRIPLE top at the $Us 425 level.
The final signal of the second major leg in $US Gold's post 2001 bull market awaits a spot future close of $US 440 or higher - $US 11.60 above the close on October 29. This situation is as simple as that.