The fall is precipitous, the rise is more gradual, but the rise always ends up going higher than the previous high. So it has been with Gold ever since its bull market started in early 2001.
the latest "precipitous" fall was, of course, the $US 14.80 fall of December 8 which knocked Gold off its perch above $US 450. By the end of last week, Gold was down to $US 433.90 - $US 22.10 below its bull market high of $US 456 set a week earlier. This week, Gold has recouped almost exactly one-third of those losses, closing on December 17 at $US 441.60 - a gain of $US 7.10 on the week.
The US Dollar continues to mirror the Gold price (or vice versa). The $US index hit a bear market low of 80.98 on December 3, managed to climb as high as 82.65 by December 16, and closed the week on December 17 at 82.23 - a fall of 0.36 on the week. Last week, Gold fell much more than the US Dollar rose. This week, Gold has risen much more than the US Dollar has fallen.
In the middle of all this, we have had a fatuous Bush economic "summit", another 0.25% rate rise by the Fed, yet another all time record US trade deficit - for November. "requests" by the European Central Bank that Central Banks slow down their Euro buying, and teeth clenched statemens from the Bank of Japan and the Japanese Ministry of Finance that there is no adequate substitute for the US Dollar as a global reserve currency.
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 exceeded both the 1982-83 and 1985-87 bull markets in percentage terms. The other feature of the present Gold bull market is one of duration. From its bottom in early 2001, the present bull market has now lasted longer than any previous Gold bull market since the $US 35 - 1 $US/Gold ratio was jettisoned by Nixon in 1971 - taking the 1971-74 and 1976-80 bulls as being separate.
On the daily chart, the almost $US 15 drop on December 8 stands out like the proverbial sore thumb. After that, you can see the gradual recovery with the Gold price now having regained its shorter-term (10 day) moving average. We await the shorter-term average moving back above the longer-term (20 day) average as solid evidence that the support point established at $US 433-35 will hold.
On the weekly Gold chart, we pointed out two weeks ago that the Gold price was further above its shorter-term (20 week) moving average than at any previous time shown on the chart. The correction of last week halved the distance to the 20 week MA, which is now well above the $US 420 level. The upward "railroad track" on this chart is still perfectly intact.
On the point and figure chart, we had a major reversal on the chart which brought Gold right back down to the new uptrend line established when Gold broke above its highs set earlier this year in mid November. This line is now providing solid support, as the action on the chart this week illustrates. The longer this line holds, the closer Gold is to making another run at its recent highs. Should the line be breached, the next solid support point is the earlier 2004 high at or about 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.
To keep perspective on Gold, examine that chart well. As you can see, all that the recent correction has caused is a simple downturn. Gold would turn up again on any close of $US 450 or higher. On the downside, as we have previously stated, Gold could retreat all the way back to the $US 400 level without breaching the uptrend. While we do NOT thing this will happen, the money managers out there are getting desperate and desperate men do desperate things. The point is that even if it DOES happen, Gold's bull market will remain perfectly intact.
With next weekend being Christmas, the next commentary will be posted on December 31, 2004. A very Merry Christmas and Happy New Year to all our readers.