In May Gold fell $US 19.80. In June, it rose $US 20.80. And on the first day of July, just before the long July 4 weekend in the US, Gold fell $US 8.30. Exciting, isn't it?
May was the month when the US basked in an unbroken string of surprisingly robust economic reports throughout the month and when the US Dollar soared. June was the month in which commodity prices did an abrupt about face from the May correction and surged higher again, with oil leading the way.
Now, here we are in July, at the start of the US summer "doldrums". Suddenly, on the anticipation of more US rate rises, the US Dollar has surged again!?, as have the yields on US Treasuries (with the price of these same Treasuries diving). Gold dived too, ostensibly because the anticipated higher yields on US Dollar investments will lessen its attraction.
To show how flighty world markets are becoming, please remember that as recently as June 22, there was a a huge surge in both US and European government bonds on the back of a report that two 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 was Sweden whose Central Bank DID cut rates, by a more than expected 0.50% - from 2.0% to 1.5%. Now, less than two weeks later, US Treasuries have tumbled on the anticipation of higher US rates.
As for the Dollar surge on July 1, as usual, only one part of the "equation" is being looked at. What is being looked at is the prospect of higher US yields in comparison with other nations. What is being studiously ignored is the the ability of American debtors to go on servicing ever higher debt loads at ever higher interest rates.
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 bar chart, the $US 8.30 fall on July 1 has duly dumped the chart back below both its 10 and 20 day moving averages. That brings to an abrupt halt two weeks of narrow trading around the $US 440 level. The significance of that $US 440 level has been pointed out many times on this page. It is easily seen on the weekly Gold chart.
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 in the June upmove. It also rose slightly above the trendline connecting the December 2004 and March 2005 peaks (the dotted red line). That resistance has now made itself felt, with Gold retreating from its narrow penetration last week.
the picture is the same on the Point and Figure chart. Same narrow penetration of the trendline, same abrupt downturn. As you can see, while the "noise level" on the chart is increasing, Gold has spent most of the year to date trading in a pretty narrow range between $US 420-430.
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.
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 then breached $US 440 on June 23, precisely the same level which confirmed the bull market on the chart way back in November last year. And now, with the $US 8.30 fall on July 1, Gold is close to turning down yet again.
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. As already stated, yet another downturn on this $US Gold chart would require a spot future close of $US 425.00 or lower.