We must repeat here what we said last week:
"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."
"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 been placed."
We saw alright. On May 31, the first trading day of this week in the US, the French "no" vote now history, the $US index leaped 1.39 points, the major victim being the Euro, of course. On the same day, Gold fell $US 3.50 - MUCH less than the $US index rose. Two days later, on June 2, the Comex traders simply couldn't stand it any longer. Impressed by the resilience of Gold in the face of these two European "no" votes, the bid the spot future Gold price up $US 7.40 on the day.
That $US 7.40 jump in the spot future price is the biggest one day rise this year, tied with an identical rise which took place on February 22 when $US Gold was climbing off its 2005 low of $US 412.60 set two weeks earlier.
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?
Please note that Gold was up $US 3.90 this week in the face of a $US index which rose 1.63 points or 1.89%. Now THAT'S unusual. On the daily chart, you can see that Gold has broken right back to the mid $US 420s range it was trading in between mid March and mid April. In the process, it has of course broken above both its 10 and 20 day moving averages. What we must await now is for the shorter-term average to cross back above the longer-term average.
On the weekly Gold chart, the main concern for traders last week was the fact that Gold has broken back below its 40 week (200 day) moving average (MA). Gold is still below that MA, but it has moved most of the way back up to it. And, it has PERFECTLY comfirmed its uptrend line in the process.
And finally, here's the upturn on the point and figure chart too, pushing the price back above the trendline it had violated when it fell below the $US 420 level. On this chart, it's early days yet. We'll see how far this reversal can get.
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 $US Gold giving the first signs that yet another "correction" may be ending, 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.