Something is going to give here, and in the not too distant future too. Take a look at the Gold $US 1 x 3 point and figure chart below. There it hangs, pointing straight down and just below the uprend line on the chart. The chart itself hasn't moved at all since Gold hit its correction low spot future close of $US 416.90 on May 23.
Since then, $US Silver has bolted 5.2% higher. The $US index has reached a new 2005 high of 86.87 on May 26 - only to fall back again at the close of the week. Even Gold stocks have been rebounding higher for the past week and a half. And Gold just hangs there in mid air, doing nothing at all. In the week since last Friday, Gold's trading range has been $US 2.10. Until Friday, May 27, it was all but frozen solid. Then came a $US 1.80 jump on Friday and Gold managed to end the week with that $US 2.10 gain.
It is interesting that Gold managed a gain (and Silver leaped) on the last day before the long weekend in the US (Monday, May 30 being Memorial Day). Especially so since the French vote in a referendum on the European Constitution on Sunday, May 29, and the expectation of a "non" vote is all but universal. This is generally touted in investment circles to be bad for the Euro, good for the $US, and therefore bad for Gold. We'll see soon enough, but the bets on the futures markets have not been placed.
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 since March 2002?
On the daily chart, you can see that the present range is even tighter than was the mid $US 420s range Gold traded in between mid March and mid April. The price is essentially flatlining while daily volume on the Comex has leaped this week. The one technical indicator we do have is the price poking above the shorter-term (10-day) moving average on May 27. It's not much, as yet, but it's a start.
On the weekly Gold chart, the main concern for traders is the fact that Gold has broken back below its 40 week (200 day) moving average (MA), just as it did in its last correction in mid February. The shorter-term (20 week) moving average is on the verge of crossing back below the longer-term (40 week) MA. Meanwhile, the Gold price remains just above the uptrend line which has supported the bull on this chart since the end of 2001.
We have already talked about the point and figure chart. At it's Friday spot future close of $US 419.80, Gold is $US 0.20 short of causing an upturn on the chart. The regaining of the $US 420 level is the first pre-requisite for any turnaround on this chart, and that will need to be followed by Gold climbing back above the trendline on the chart.
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.
With Gold now firmly mired in yet another "correction", the fundamental uptrend line as shown on the $US 5 x 3 chart must be stressed. On this chart, it was Gold's rise into the mid $US 450s in December 2004 which confirmed finally and beyond doubt Gold's $US bull market by making it possible to draw an uptrend line on this chart. As long as that uptrend line remains intact, so does the $US Gold bull market. A close of $US 435.00 or higher is required to turn the chart up.