By dint of extraordinary efforts - not least of which was an extroardinary dive in Gold lease rates on September 2 - the $US Gold price has merely regained its levels of three weeks ago. The spot future high for 2005 so far is $US 446.10 reached on August 16. On September 2, spot future Gold closed at $US 445.40.
In fact, Gold actually traded as low as $US 430.70 on August 29, the very day that the New Orleans levees were breached and the REAL devastation began and that the oil price surged $US 2.61 to an all time high of $US 69.81. That also happened to be the day when the spot future month rolled over from August to October.
With the end of the US "summer doldrums" so rudely shattered by Hurricane Katrina, Gold has once again rebounded despite the best efforts of the "market makers" to curb it. As the charts below show, however, it is still being contained at levels it has reached many times before this year but has yet to breach. We still await a $US 450 plus spot future close or one which breaches the December 2004 bull market high of $US 456.
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, still hovering right around its March 2002 level.
On the daily chart, you can see the dip when the hurricane hit and the abrupt upwards reversal as the consequences of the storm became clear. You can also see that the prolonged sideways action over the past three weeks has once again pushed the short-term (10 day) moving average back below its longer-term (20 day) counterpart. Trading in coming days and weeks at current levels or higher would quickly reverse this crossover.
On the weekly Gold chart, the price dipped briefly below the trendline connecting the previous three highs on the chart before bolting higher again as the week progressed. Please note that the low for the week stopped precisely at the point where the 20 and 40 week moving averages have converged.
Gold dipped briefly below the line connecting previous highs on the Point and Figure chart too. At present, it is at resistance. A breakout on this chart would come with a spot future close of $US 449 or higher. A signal of further distribution would come on a spot future close of $US 443. or lower.
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. Since then, the $Us 5 x 3 chart has not moved. 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.