At its spot future close of $US 446.80 on March 11, Gold is now back to within $US 10.00 of its bull market high of $US 456.00 set way back on December 3. This has come after a comparatively good week during which the spot future price rose another $US 11.70 or 2.7%, more than counteracting a $US index which was down 1.4% on the week.
We say a "comparatively" good week because Gold did not confine its rise to $US, it was up in terms of all major currencies, even the Euro albeit marginally. Encouragingly, the closer Gold gets to its December highs, the steeper the "wall of worry" becomes. This is best illustrated by the various Gold stock indexes which are getting more and more reticent the closer Gold approaches its December highs.
While all this is going on, the potential threats to paper markets, $US paper markets in particular, continue to strengthen. The CRB index is on the rampage. Japan has joined South Korea in musing about "diversifying" its reserves. Mr Bernanke has joined Mr Greenspan in assuring anyone who will listen that the huge and growing US trade gap is "not a crisis". Treasury Secretary Snow is even reiterating the Administration's "strong Dollar policy" - and still no-one is laughing.
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. Which of the three would you have preferred to own in the nearly three years since March 2002?
On the daily chart, we stated here last week that any spot future close above $US 440 would be a strong signal of another run at the December highs in the mid $US 450s. We closed closer to $US 450 than $US 440 this week, with the bullish railroad track of short-term (10 day) moving average above long-term (20 day) moving average and price above both now firmly in train. As it is on all charts now, Gold's major resistance has been "whittled down" to that $US 456 high of December last year.
On the weekly Gold chart, Gold has closed above its shorter-term (20 week) moving average for the third week in a row. With Gold on this chart now exhibiting higher highs and higher lows for the past five weeks, the December 2004-early February 2005 correction should be history. The spot future price is now back well above both moving averages and the shorter-term MA is comfortably holding above the longer-term MA. All that's left is that $US 456 high.
The most striking feature of the point and figure chart is the fact that buyers have come in MUCH higher to turn around the most recent downturn (line of "O"s) than they did the previous one. Having done that, they have pushed the price much higher than it was the last time it turned down. The resistance zone is clearest on this chart and lies between $US 450 and 456. Any close of $US 460 or better would be the fist signal of another upleg on the post 2001 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:
|
As we have been saying since last November, the chart to watch is 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 a POWERFUL support for the bull.
Please note once again the significance of the $US 440 level. It was this level which confirmed the next leg of Gold's bull market on the $US 5 x 3 chart when it was breached on the upside back in November last year. Now, the spot future price is comfortably back above that $US 440 level and back to the top of the "V" which shows the post December 3 correction. On this chart, a price of $US 470 or higher would now confirm the next upleg in the post 2001 $US Gold bull market.