Last week (September 12 - 16) Gold took out its December 2004 $US 456 spot closing bull markt high. This week, Gold has consolidated that, rising as high as $US 469.40 on a spot future closing basis on September 21 before falling back to close the week at $US 463.90.
On September 21, Gold had risen by nearly $US 40.00 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 23, and in the face of another Hurricane - Rita - threatening the refineries on the Texas coast, oil closed at $US 64.19, down $US 5.62 since August 29. And then there's the US Dollar. The $US index closed at 88.18 on August 29. It closed on September 23 at 88.98. Gold has surged despite a US Dollar which has actually risen and an oil price which is down substantially. This is unprecedented in the $US Gold bull market to date.
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 what happens to almost any market when it takes out a high set a considerable time in the past. Given any "excuse" (like the force of Hurricane Rita being downgraded, for example), there is a correction. What is important is to see if the bottom of this correction can maintain levels at or above the high which was taken out - in this case the December 2004 high of $US 456.
On the weekly Gold chart, the only difference between this week and the two previous weeks is that Gold closed towards the bottom of its weekly trading range this week instead of levels at or near the top of the range. The shorter-term 20 week moving average (MA) is back comfortably above its 40 week counterpart. The old bull market high has been taken out. This is a "bullish" chart.
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 comfortably 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 460 last week and a new bull market high of - ALMOST - $US 470 this week.
The $US 469.40 close of September 21 means that the current upleg on the chart is now 2 "Xs" 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.
Over the past week, spot future Gold gained $US 3.60. The spot future Gold price did go above $US 470 in intraday trading on both September 21 and 22. However, spot future Gold has not yet CLOSED above that level, and point and figure charts are based on CLOSING prices.
It now only remains to wait until a bottom for the correction is established and to see whether the subsequent rise can propel Gold to and above that $US 470 level on a spot future CLOSING basis.