The Gold market continues to sit idle in the water, even as the approaching storm front has agitated the water greatly this week with a sudden bout of stock market weakness. Yes, there was that one day fall of $US 5.30 on April 14, but apart from that, Gold has remained in the $US 423 - $US 429 trading range in which it has been trading for the last three weeks. On the week, Gold lost $US 1.90. This is a fair reflection of the $US index which, after reaching a high of 84.99 on April 14, closed the week at 84.50 - a gain of 0.09 on the week.
Last week, we had this to say about the growing pressure on paper markets:
"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."
This week, the strains finally broke out in action, at least on world stock markets. Ironically, it took place just as the IMF - World Bank - G7 - were about to meet in Washington in their latest attempt to assure the world that everything was under control.
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?
Last week, the Dow was up 34 points since March 27, 2002. This week, it is down 340 points over the same period. Gold is an even more "sore thumb" in the table now.
On the daily chart, you can clearly see the very tight trading range that has now persisted for just over three weeks. As Gold dips just below its longer-term (20 day) moving average (MA), the shorter-term (10 day) MA dips down towards it. The support point at or about the $US 425 level remains obvious. The longer Gold remains in this range, the closer together the two MAs will get, and the smaller poke to the upside that will be necessary to produce a buy signal on this chart.
On the weekly Gold chart, Gold has now bounced off its longer-term (40 week) moving average for the past four weeks. This average remains 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 trading range is shown by the very compressed sideways action. At present, we have a potential double bottom at the $US 424 level, which would become an actual double bottom on any close of $US 427 or higher.
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. The efforts are indeed desperate, and up until last week, the result was ominously quiet markets. That is no longer the case. The pressure has just ramped up another major notch.