Two weeks ago, Gold regained or surpassed its levels at the beginning of the year in terms of ALL (thirteen) major currencies we watch. Last week, both the CRB and the $US oil price hit new highs for the year. And this week, on March 22, the Fed did what everybody in the world expected them to, they raised the Fed Funds rate by another 0.25%, the seventh such raising since last June, to 2.75%.
The turn actually came in the middle of last week. On March 17, the Gold and oil price both fell sharply and so did the CRB index. On the same day, the $US index began a rise from the mid 80.00 level which is still going on.
All this supposedly came about on a heightened market anticipation that the Fed might actually accelerate their rate rises at the March 22 meeting or telegraph in the press release that they were planning to do so. In the event, the Fed stayed in step and only raised rates by 0.25%. They did not drop "measured" modifier either. But they did take one step further in recognising the "price pressures" building up in the US. This was taken as a sign that the Fed is going to continue and quite possibly accelerate its rate rises. And this, according to most of the conventional analysis we have seen, is deemed to be "good" for the US Dollar.
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, Gold's $US 14.90 fall this week has pushed the price back down well below the longer-term (20 day) moving average (MA). As you can see on the chart, the shorter-term MA has curved right back down to its longer-term counterpart and will fall back below it next week, thus continuing the pattern which has been in place ever since Gold's mid $US 450 highs in December 2004
On the weekly Gold chart, Gold has broken below its shorter-term (20 week) MA this week, thereby breaking the pattern of being above both (20 and 40 week) MAs it had set over the past month. As you can see on the chart, Gold broke briefly below its 40-week MA at the bottom of the previous correction in mid February. We'll see what happens this time. Right now, the 40-week MA stands at $US 421.70 - which is the support point.
On the point and figure chart, you can see that Gold has had an abrupt correction back to the consolidation zone in the mid $US 420s it set in January - February just before the short-lived dip down to $US 410 in mid February. YOu can see the abrupt change of sentiment here, based on the false assumption that an acceleration in US rate rises will be good for the $US.
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.
As you can see, the $US 5 x 3 Gold chart has now turned down again and the pattern has filled in a BIG distribution zone between $US 410 and $US 455. Gold has not traded below the $US 400 level since September 2004. To show definite signs of weakness on this chart, it will have to go down there again.>/p>
The more obvious the price inflation in the US becomes (and it's becoming pretty obvious), the more desperate will be the efforts to support the US Dollar AND to hold down the price of alternatives to the US Dollar. Gold, and to a lesser extent silver, are the only forms of real wealth which present an alternative to not only US Dollars, but all global paper fiat moneys. In the short run, Gold could go in either direction. In the longer-term, Gold has nowhere to go but up. We don't know how long the fairy tale about higher US