It was an ominously quiet week for Gold, and almost everything else. The exception is the $US oil price which plummeted from a 2005 high of $US 57.35 just before the Easter break to close a week later on April 8 down just over $US 5.00 to $US 53.32. The most watched price of all, the "price" of the US Dollar, fell slightly by week's end after having reached a level within 0.50 points of its 2005 highs on April 7 when the $US index closed at 84.87.
Gold itself was up $US 1.00 on the week and has now been trading in a range of about $US 5.00 ($US 423.90 - $US 428.70) for more than two weeks now, since March 23. Last week Gold gained $US 1.10 on the week. This week, the gain was $US 1.00. As the strains on the global financial system increase, the Gold price trades in an ever tighter range and so does the US Dollar. This week, the $US index was up precisely 0.01 points.
Indeed, the strains on the system are growing so intense that the need to keep markets (and therefore the valuations which underpin continuing consumer borrowing) up is slowly taking over from the fear of both market bubbles and incipient price inflation. This week, the Australian Reserve Bank, which was almost universally expected to raise rates, stood pat. So did Europe's ECB, despite the clear and growing evidence of price inflation across the continent.
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 clearly see the very tight trading range that has now persisted for just over two weeks. Gold is now trading at or about its shorter-term (10 day) trading range which is, of course, back well below its longer-term (20 day) counterpart. The support point at or about the $US 425 level is obvious. We now await the decision as to which way the price breaks from here.
On the weekly Gold chart, Gold has now bounced off its longer-term (40 week) moving average for the past three weeks. This average, which now stands at $US 423.90, is the obvious support point 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 the first support point made last week has been reinforced this week as we now have a second upturn on the chart. On this chart, further signs of weakness would come with a spot future close of $Us 421 or lower. On the upside, a topside break comes at a closing price of $US 430 or higher. As long as neither point is reached, the very tight trading range will go on.
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. The efforts are indeed desperate, the result is ominously quiet markets. We do not expect them to remain quiet much longer, certainly not until the end of the month.