US stock markets are teetering near or at their 2005 lows. The spread between short and long term US Treasury yields is once again contracting as longer-term yields have been falling faster than shorter-term ones over the past few days. After weakening slightly in mid week trading, the $US index was once again advancing at the end of the week. And the $US Gold price continues to mirror the $US almost exactly, strengthening slightly in mid week only to give up most of its weekly gains by Friday.
This week, the breathlessly awaited US economic statistic was the US jobs report which came out on April 1. It came out below expectations, as 110,000 new jobs were reported to have been "created" in March, about half Wall Street's expectations. This was spun as being positive for "inflation", with US businesses controlling their spiralling raw materials costs by lowering their hiring. The raw unemployment number, however, fell from 5.4% back to 5.2%.
To make sure that the "message" of lessening of "inflationary pressure" which was desired sticks, at least over the weekend, Gold fell as soon as trading ended in London and became the exclusive preserve of the US. In the last two hours of US trading on April 1, the $US Gold price gave up most of its gains for the week. Gold closed down $US 2.80 on Friday but still managed a small gain on the week of $US 1.10.
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?
On the daily chart, you can see that the Gold price recovered slightly by mid week to make it back to its shorter-term (10 day) moving average. On Friday, the price bounced off this average to take Gold back to within $US 1.10 of the $US 424.80 low it set on March 24. The shorter-term MA remains well below its longer-term (20 day) counterpart, reflecting the current correction. Once again, we must wait for these MAs to cross again before having confirmation of another upmove.
On the weekly Gold chart, Gold has now spent the past two weeks falling to, but not below, its longer-term (40 week) moving average. On this chart, the bullish outlook remains perfectly intact with the shorter-term (20 week) MA still comfortably above its longer term counterpart. As you can see on the chart, the price dipping briefly below the 40-week MA at the bottom of the previous correction was the catalyst for the upturn. We'll see if history repeats itself
On the point and figure chart, the abrupt correction has found its first support point, seen in the upturn this week. This support point is $US 425 on the chart. Once again, we are beset by "noise" on this chart, the long term uptrend remaining perfectly intact.
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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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 rates being "good" for the Dollar will last. We don't think they will last very long.