Finally, after nine and a half months, the $US 456 spot closing high on Gold's bull market has been taken out. At its spot future close of $US 460.30 on September 16, Gold has now exceeded the December 3, 2004 high by $US 4.30. That's not enough to be decisive (see below) but it is a STRONG signal for a new upleg on the bull market.
Gold has now risen by almost exactly $US 30.00 since it closed $US 430.70 on August 29, the 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. On September 16, oil closed at $US 63.00, down $US 6.81 since August 29. And then there's the US Dollar. The $US index closed at 88.18 on August 29. It closed on September 16 at 88.04. Gold has surged by 7% despite a US Dollar which has NOT gone down and an oil price which is down by 9.8%. Now THAT'S impressive.
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.
On the daily chart, you can see the dip when the hurricane hit and the two-stage surge since then, the second of which has now carried Gold to new bull market highs. The shorter-term (10 day) Moving Average (MA) is now comfortably back above its longer-term (20 day) counterpart and the Gold price well above both. This is a VERY bullish chart.
On the weekly Gold chart, the price dipped briefly below the trendline connecting the previous three highs and stopped precisely at the point where the 20 and 40 week moving averages converged when Katrina hit. Now, the price is $US 30 higher and has set new bull market highs. The 20 week MA has crossed back above its longer-term 40 week counterpart after having being at or below it for the past three months. That was the "buy signal". It has now been strengthened because the old bull market high has been taken out.
Gold dipped briefly below the line connecting previous highs on the Point and Figure chart too. It then crossed back above it, accelerated, and is now four clear "Xs" above its previous bull market high set in December last year. This chart has also signalled a decisive beginning to a new upleg on the bull market.
As you might expect given the new bull market highs, all three of these charts are unanimous.
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 well over double the fall in the $US index.
As we have been saying since last November, the chart to watch 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 2004 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.
As you know, ever since the Gold price retreated from its December 2004 high, the $US 440 level has been repeatedly, and unsuccessfully challenged. That was true up until this month, when the spot future Gold price reached $US 450 last week and a new bull market high of $US 460 this week.
The $US 460.30 close of September 16 means that the current upleg on the chart is now 1 "X"' above the December high. For absolute confirmation of the next upleg of the bull market on this chart, we require a high which is 3 "Xs" above the previous high. In this case, that requires a spot future Gold close of $US 470 or higher - just under $US 10 above current levels.
Over the past week, spot future Gold gained $US 10.30. A similar performance next week would push Gold just above that $US 470 level and give final and conclusive confirmation of the next leg in Gold's bull market. After that, the MAJOR resistance level is $US 500-510. For much more on that - see our main Gold This Week page.