As you can see on the daily bar chart, $US Gold has now been "flatlining" for three weeks, ever since it dipped below the $US 420 level on January 7. This week, Gold fell $US 5.00 on January 25, rose $US 4.80 on Janury 26, and has been flat the rest of the week. On the Comex, there's a whole lotta trading going on, and the open interest continues to gradually decline, but the price is going nowhere.
Right now, we can say three things about Gold. First, it has established solid support at the $US 420 area on the paper markets. Second, demand for the physical metal, not necessarily demand for paper claims to it, is steadily increasing globally. Third, it remains the only infallible means of financial insurance against the disruption which another dive in the US Dollar will bring with it.
A month ago, the $US was teetering on the brink of unplumbed depths with the $US index closing at 80.60 - just above the VITAL 80.00 level which is its floating currency era low. The index has made a faltering recovery from there and is now at 83.53, just below the level it was at on January 7 when Gold made its 2005 low (so far?) of $US 419.50
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. Which of the three would you have preferred to own in the nearly three years since March 2002?
Interesting, isn't it? with Gold over 40% higher and the $US nearly 30% lower, the Dow is now at exactly the same level it was at back in March 2002 when Gold first decisively broke above the $US 300 level.
On the daily chart, you can see that Gold has now established solid support at or about the $US 420 level over the past three weeks. This week, Gold fell $US 5.00 on Jan. 25 only to bounce back by $US 4.80 on Jan. 26. For the rest of the week, it did nothing. The significan change this week is that the shorter-term (10 day) moving average has once again crossed above the longer-term (20 day) MA. This is the first indication on this chart of renewed strength. With that, and the solid support at $US 420, we await a close of $US 430 or higher as the signal for another upleg on $US Gold.
On the weekly Gold chart, the Gold price is slowly moving back towards its shorter-term (20 week) MA. Right now, the 20 week MA stands at $US 430.27. A close above that would be the signal of another upleg - see the similarity with the daily chart above. ON this chart, the Gold's uptrend remains perfectly intact, and has not been seriously threatened by the correction.
The point and figure chart shows clearly how Gold's downward momentum has stopped dead with the third upturn from the low $US 420s this week. We have no breakout on this chart, but what we do have is another indication of solid support at or about the $US 420 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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I know we've been saying this ever since November, but it remains true. The chart to watch for the indeterminate future continues to be the $US 5 x 3 point and figure chart. The uptrend line established on this chart when Gold broke above the $US 440 level in November 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.
As we have pointed out repeatedly, it is VITAL for the $US index to keep its head above its post 1972 lows of 80.00. A fall below this level would GREATLY increase the chances of a crash dive in the $US, and such a dive would make the continuation of Bush Administration policies all but impossible.
The fact is that Mr Bush's policies as outlined in his inaugural address ARE impossible to implement. What is being maintained, so far, is the illusion that they can be implemented. Next week, we have the Iraqi elections, the FOMC meeting, the State of the Union message, and the G-7 meeting. Any or all of these has the potential to shatter the illusion. Stay tuned.