Remember May 2005, the month of the unbroken string of surprises in the form of US economic statistics which were all much better than people had been "expecting"? Over that month, the $US Gold price fell $US 19.80. Now, here we are about to enter the last week of June, and Gold has risen $US 24.20 so far this month. In the process, it has managed to poke its head back above ($US 2.10 above to be exact) the $US 438.40 level at which it began the year.
The economic situation continues to deteriorate as the oil price surges towards $US 60.00, the $US index keeps stalling just below the 90.00 level, and the debts and deficits keep on soaring higher.
Now, we are seeing a sudden worsening in political expectations too. In Europe, the "no" Constitution votes in France and the Netherlands were followed up by a political logjam which resulted in the EU budget being thrown out. In the US, Mr Bush's "popularity" rating is falling almost as fast as is support for his Iraq war. Amazingly, a recent US poll puts Mr Bush ahead of Saddam Hussein (by a 49% to 44% majority - some people can't decide about ANYTHING) as the man most responsible for starting the Iraq war. Confidence in both politicians and their policies is waning fast on BOTH sides of the Atlantic.
Not the best preparation for the heads of the G-8 nations to meet, as they do in Scotland in less than two weeks.
To starkly illustrate just how "nervous" international investors are getting, there was a huge surge in both US and European government bonds on June 22 when it was revealed that of the seven individuals responsible for setting British interest rates voted in favour of LOWERING rates at the last Bank of England meeting. Adding fuel to this fire is Sweden, whose Central Bank DID cut rates, by a more than expected 0.50% - from 2.0% to 1.5%. this is even more significant in light of the fact that the next ECB meeting is on July 7, and ECB rates are presently 2.0%, a level which has not moved for more than two years.
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 since March 2002?
On the daily bar chart, the month has seen ALL the tactical signals for an upside break take place. First the price broke back above both the 10 and 20 day Moving Averages (MA). Then the shorter-term MA crossed back above the longer-term MA. The Gold price has remained above both, and has recently been pulling away from them again. The daily chart here is decidedly bullish.
On the weekly Gold chart, Gold has bolted back above its 40 week (200 day) moving average (MA) after having PERFECTLY comfirmed its uptrend line. Right now, the 20 and 40 week moving averages are within $US 0.40 of each other, with the longer-term average still slightly above the shorter-term one. The Gold price is, of course, comfortably above both.
The point and figure chart shows a very interesting picture. For the second time this year (the first time being back in February), a downturn on this chart has been completely negated by the subsequent upmove. Both the February and May 2005 corrections looked like aberrations on this chart, and Gold's subsequent moves showed that they were. As you can see, the chart has now broken slightly above the trendline connecting the two previous peaks.
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.
On June 16, the spot future Gold price bolted $US 7.10 higher to close at $US 436.20. That move turned UP the $US 5 x 3 Gold chart, precisely one month after it had turned down.
Gold's new all time high on the Euro on June 23 gives even more importance to this upturn. On the $US 5 x 3 chart, Gold is now in a HUGE distribution zone. Any move on the upside would break the symmetry of this zone, as would another downturn from present levels.
On an equivalent Gold in Euros chart, a Gold close of Euros 365 has now been reached, confirming a new leg in the Gold bull market. Gold closed at 366.90 Euros on June 23. On the $US Gold chart. A new upleg on the bull market would require a close of $US 470 or higher - three clear "X"s above the $US 455 bull market high set last December.