In May Gold fell $US 19.80. In June, it rose $US 20.80. Thus far in July, Gold has fallen $US 15.800. All these pricing adventures have now definitely reached thepoint where they can be described as "volatile".
Political pressures have been steadily mounting, all over the world. Last week saw the atrocity in London. This week has seen a steady deterioration of the situation in both Iraq and Afghanistan and a worsening of Mr Bush's domestic political situation with his main advisor, Karl Rove, deeply implicated in a CIA exposure scandal. Riding over it all, thus far successfully, are an unending sequence of "bolstered" economic statistics which are striving with might and main to convince Americans that their economy is still "hot".
The G-8 Summit has come and gone with absolutely NOTHING having been resolved. There was no mention of what both the OECD and the BIS chose to call the "global financial imbalances" - translated from diplomatese - the gigantic US trade and current account deficits.
The most eye-opening recent stastic, however, has not come from the US but from China. In the first six months of 2005, China's foreign exchange reserves (overwhelmingly US Dollars, of course) increased by $US 100 Billion to $US 711 Billion. This increase is double the rate of the first half of 2004. If continued at the present pace China's reserves will increase by ONE-THIRD by the end of 2005 and top the $US 1 TRILLION mark by June 2006. They can't keep it up.
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?
The daily bar chart broke back below both its 10 and 20 day moving averages last week. With another $US 2.50 fall this week, $US Gold is now back approaching its levels of early June. It will be interesting to see if daily volumes on the Comex now start to pick up dramatically ,as they did the last time that Gold was threatening the $Us 420 level.
On the weekly Gold chart, Gold 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 now having retreated back below both moving averages and back to the uptrend line.
the picture is the same on the Point and Figure chart. Same narrow penetration of the trendline, same abrupt downturn. Now, after an anaemic upturn, Gold has once again turned down and is challenging its trendline. For most of the year to date trading in a pretty narrow range between $US 420-430. It's still there, albiet right at the bottom of it.
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. With the $US 13.20 fall on July 1 and 5, the day before and the day after the July 4 holiday weekend, Gold has turned down again on the chart.
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. It has since retreated as low as Euros 347.60 before closing the week on July 15 at exactly Euros 350. On the $US 5 x 3 chart, Gold is back in its ever narrowing "distribution zone". It will take another close of $US 440 or higher to turn the chart up. On the downside, a break below the distribution zone would come on a spot future price close of $US 415 or lower.