This week, Mr Greenspan has stood up in front of the US Congress to warn them to stop it (deficit spending, that is) or we'll all go broke. Mr Bush has stood up on US prime time television to tell his fellow Americans that it's time the US started building nucular (sorry, nuclear) power plants and exploring everywhere in the US from the Alaskan tundra to old US Army bases for more oil. He wants the US to lessen its dependence on imports for energy supplies.
Mr Bush also pushed his plan to "privatise" Social Security, telling everyone that they could work hard, put their money in US stocks and bonds, and retire happy. Doing this, of course, now makes it politically NECESSARY that neither the US stock nor Treasury bond markets takes any kind of a dive. That would NOT be conducive to Mr Bush's policies.
In the midst of all this, the US has reported its biggest monthly fall in durable goods orders since September 2002, more falls in consumer confidence, and a 3.1% "growth" figure (well below market expectations) for the first quarter of 2005.
The big indication of the strain on the US Administration in particular and the US government in general last week was the explosion of "China bashing". This week, the evidence of that strain has become even clearer. The President of the United States (who hates press conferences) has chosen to go on television to hold a (well orchestrated, it's true) press conference discussing US domestic ECONOMIC issues.
Gold didn't do much this week, small wonder considering the political imperatives now in play, but it did eke out a small gain in $US terms - in the face of a US Dollar that rose to post an 0.97 point gain on the $US index this week.
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, the upward pattern is firming. Gold broke above a month long trading range between $US 422 - 428 last week. At the same time, the shorter-term (10 day) moving average (MA) moved back above the longer-term (20 day) MA - always a pre-requisite for a concerted upmove on the daily chart. This week, Gold has spent the entire week above both MAs, and has managed to eke out a small gain on the week despite a rising US Dollar.
On the weekly Gold chart, Gold has spent the week above BOTH its (20 and 40 week) moving averages for the first time since it was coming off its early December 2004 bull market highs in the mid $US 450s. You can see that the longer-term (40 week) MA formed solid support during Gold's solid month of trading in the mid $US 420s. Resistance now comes from the highs in the mid $US 440s set in March and above that, from the Bull market highs in the mid $US 450s set back in early December.
On the point and figure chart, the trading range shown by the very compressed sideways action was broken on the upside last week. Now, we have distribution at a higher level. A signal for increased upside strength would come on a close of $US 440 or higher on this chart. This is the level which would turn the strategic $US 5 x 3 point and figure chart up again.
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.
The big "decision wedge" shown on this chart is the decisive one for Gold. It cannot continue to move "sideways" indefinitely but must be broken either up or down. Keep watching this chart, it is the most important Gold chart we present on these pages.