We have had the $US 9.00 upside explosion on Thursday, August 11 when China made their intentions clearer in regard to their currency "float". We have had the $US 6.20 dive on August 17 when a July PPI of 1.0% (12% annualised) was announced. The upmove was congruent with the news, the downmove was the exact opposite to what the news "should" have produced.
This week, as you can see on the daily bar chart, Gold hardly moved at all. It traded in the tightest weekly range for the whole year thus far, moving a princely total of $US 2.00 over the week.
Given the time of year, that's actually quite appropriate. We are now nearing the end of the summer break in the US with the Labor Day holiday next weekend. Then, on September 6, Mr Bush and the entire US Congress returns to Washington DC, while on Wall Street, all the traders crash back into top gear.
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 over the period covered by the table, the $US Gold price has gone up a lot more than the $US has gone down on a trade weighted ($US index) basis. And look at the Dow, back below its March 2002 level.
On the daily chart, Gold hit a new 2005 high of $US 446.10 at its spot future close on August 16. Then came the PPI number on August 17 and Gold slumped $US 6.20. Since then, the price has flattened out to the point where it is barely moving at all. For the second time in a month, the ten and twenty day moving averages are converging with the Gold price right at the potential meeting point.
On the weekly Gold chart, Gold has stopped moving altogether after its gyrations of the previous two weeks. As you can see, the current price is still above the trendline connecting the previous three highs on the chart and remains above both the 20 and 40 week moving averages.
The picture is identical on the Point and Figure chart. However, being a point and figure chart, it has not moved at all this week.
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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Please note that in percentage terms, the $US Gold price rise is more than double the fall in the $US index.
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.
Ever since Gold broke back below that $US 440 level after having set a bull market high of $US in early December 2004, that has been THE resistance level.
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. It could not go higher, and corrected down to $US 420.20 on July 19 - turning the $US 5 x 3 chart down again in the process.
On August 11, with a $US 9.00 Gold price rise (to $US 445.50), the $US 5 x 3 chart turned up again as Gold once again breached that $US 440 level. For the entire year so far, Gold has been in an ever narrowing distribution zone on this chart. Now it has poked outside it, and the direction is to the upside.
Resistance on the $Us 5 x 3 chart is, of course, at the bull market high of $US 455. Above that, $US 470 - or higher - is needed to confirm the next upleg on the $US Gold bull market.