For three weeks, we have been saying that: "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." This week, Gold got there. The spot future price closed at $US 440.50 on November 15. By the end of the week on November 19, it was up to $US 447. In $US terms, that's definitive. The second leg in Gold's post 2001 $US bull market is well underway.
Just over two weeks ago, Senator Kerry conceded the election and Mr Bush was in for four more years. Since then, the Dollar has accelerated downstairs and Gold has accelerated upstairs. We have also had another official rate rise with the Fed Funds rate raised to 2.00% (even with the ECBs official rate) at the FOMC meeting on November 10. And now, as signed into law by President Bush on November 19, the Treasury has a new debt ceiling - up $US 800 Billion to $US 8.184 TRILLION.
So, the US Treasury has again had its "credit card" topped up. It can borrow again. The BIG question looming is who will lend, and if they do continue to lend, what kind of interest rate will they demand to offset the risk inherent in the falling US Dollar?
Ever since the election, rumours have been proliferating about US Dollar and US Dollar asset SELLING by China, Japan, India, South Korea, etc. Both volume and open interest in the Gold futures markets are huge, but if there have been any "shorting raids" on Gold, they have been singularly unsuccessful. The last vestige of "normalcy" left is that Gold continues to merely mirror the US Dollar's fall, it is not yet rising in terms of other major world currencies.
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:
|
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, nothing has changed, with Gold going up on an almost daily basis. The "railroad track" remains 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. Gold spent the last two weeks of the election campaign trying to breach $US 430 and was knocked all the way down to just above the $US 420 level on the day of the election. Less than two weeks later, Gold is challenging $US 450.
The weekly Gold chart illustrates the power of the moving average (MA) crossover signal. The crossover - shorter-term (20 week) MA crossing back above longer-term (40 week) MA - took place a month ago. Two weeks, the Gold price set new 2004 highs, breaking above the spot future closing highs set back in April. This week, Gold has given the final confirmation of the second leg of its bull market by breaking above the $US 440 level
On the point and figure chart, Gold continues to climb to levels last seen in 1988, in the process firming the new steeper uptrend line (the green line) seen on the chart. On this "tactical" ($US 1 x 3) chart, the new upleg is firmly established.
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:
|
As we have been saying here for the past two weeks: "To really gauge the LONG TERM potential for this $US bull market, we need to refer to our strategic $US 5 x 3 point and figure chart. We await only a close above $US 440 now as ...the final confirmation of the (dashed) uptrend line on the chart, and the signal a rock solid LONG TERM $US Gold bull market."
"Once $US 440 is breached, the upward momentum in terms of $US Gold should increase. And if it does increase, Gold should start to move up against ALL currencies, thereby mirroring its action in late 2003 and 2002."
The $US 440 level HAS been breached, and $US Gold has accelerated - a bit. What it has not yet done is to start moving up against all currencies. We can happily sit back and wait for that to start to happen however, since the second leg of the $US Gold bull is DEFINITELY confirmed. If we repeat what happened in 2003 and 2002 this year, the big upmoves in Gold - against the $US and everything else - could start at any time.