On July 22, the day after the Chinese announcement that they were ending the fixed relationship between their currency and the US Dollar, spot future Comex Gold closed down $US 0.70 at exactly $US 425.00. That's right in the middle of the $US 420-430 trading range which Gold has been in for most of this year.
Here is what we had to say on this page last week:
"The most eye-opening recent stasistic, 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."
It would seem that the Chinese government and the People's Bank of China have come to the same conclusion.
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?
Two weeks ago, the daily bar chart broke back below both its 10 and 20 day moving averages (MA). Now, the Gold price has popped back above the shorter-term average and is smack bang in the middle between the two averages. As usual, we await the Gold price rising back above the longer-term (20 day) moving average and for the crossover - the shorter-term MA moving back above the longer term MA.
On the weekly Gold chart, Gold has once again PERFECTLY comfirmed its uptrend line, just as it did at the end of May. The Gold price, however, is back below both 20 and 40 week moving averages with the shorter-term average once again dipping below the longer-term one.
The picture is the same on the Point and Figure chart. Gold is now moving sideways in a very narrow band after once again challenging the uptrend line. For most of the year to date trading in a pretty narrow range between $US 420-430. It's still there, exactly in the middle 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 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 22 at exactly Euros 351.80. 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