Last Friday, Gold reversed a $US 3.00 fall on the previous day by bolting $US 5.60 higher to a new bull market high of $US 456.00. The catalyst was a 0.99 point dive by the $US to a new bear market low of 80.98 - less than one point above the bottom of its previous bear market set way back in April 1995.
Throughout the Gold rally, and especially as it accelerated in the wake of the November 2 US election, the rises in the Gold price were for the most part mirror images of the falls in the $US index. This week the $US index has "rallied", it is up from 80.98 to 82.59, that's up 1.61 points or 1.99%. Gold is down from $US 456.00 to $US 433.90. That's down $US 22.10 or 4.85%. Gold hasn't been rising faster than the US Dollar fell, but when the US Dollar rally came, Gold sure fell faster than the US Dollar rose (as did Silver!).
This is what we said on this page last week:
"No market goes straight up - or straight down. There will certainly be a $US rally at some point. There will certainly be a $US Gold correction at some point. The two events may well, but will not necessarily, coincide. The major point here is simply that Gold is in a well confirmed second leg of a long-term bull market. Right now, the $US Gold "price" could correct all the way down to $US 400 without changing the uprend in any way. We do NOT think that is likely."
The two events certainly have "coincided". As far as Gold correcting all the way down to $US 400, we still don't think that's likely. The most likely technical stopping point in this correction is the early 2004 highs at or about the $US 430 level.
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.
At its $US 456 close on December 3, the present Gold bull market had now exceeded both the 1982-83 and 1985-87 bull markets in percentage terms. The figures are: 1982-83 - up 72.3% -- 1985-87 - up 77.3% -- 2001-04 - up 78.8% - so far. This week with Gold down to $US 433.90, the percentage gain has dropped to 70.20%
On the daily chart, the almost $US 15 drop on December 8 stands out like the proverbial sore thumb. After just over a week trading between $US 450-456, Gold has plummeted below both moving averages and is back to its levels of early November, just after the US elections. A month of accelerating $US weakness has come to an end, and Gold has reacted instantly.
On the weekly Gold chart, we pointed out last week that the Gold price was further above its shorter-term (20 week) moving average than at any previous time shown on the chart and pointed out that this was a natural reaction to the most severe correction of the year, the one which bottomed out in May and took the Gold price far below its longer-term (40 week or 200 day) moving average for the first time in the post 2001 bull market. Since then, of course, Gold has gone on to confirm a second major leg in its bull market and the moving averages are again supporting the uptrend with the shorter term MA well above the longer term MA and Gold remaining well above both.
On the point and figure chart, we have a major reversal on the chart which has brought Gold back down towards, but not quite to, the new uptrend line established when Gold broke above its highs set earlier this year in mid November. Those highs - at or about the $US 430 level - are now solid support. The uptrend line on this chart also presently stands at or just above the $US 430 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 $US 440 level has been decisively breached on the $US 5 x 3 point and figure chart. That is the final and conclusive technical evidence that $US Gold is now in the second leg of its bull market. The trendline on the chart (see the link) is now a POWERFUL support for the bull.
The correction on Gold this week doesn't change that in the slightest, even though Gold has retreated back below that $US 440 level. As you can see on the chart (use the link above) all that has occurred is a simple downturn on the strategic chart.