Gold Bottom Commentary - July 27, 2001

Last week, the spot future Gold price rose $US 2.60. This week, the price fell $US 2.80. The intra-day spread for the week - again on a spot future basis - was high $US 270.30 - low $US 265.40. Once again, Gold is below $US 270, still in the process of trying to establish a support point in the mid $US 260s - just like the one it established in early June.

You can best see Gold's tight trading range on the weekly bar chart on the left. For the past month, Gold has been trapped in a $US 5.00 trading range between $US 265 - $US 270. For the past two months, the trading range has been $US 10.00, between $US 265 and $US 275. Throughout this period, Gold has been trying to establish a trading range ABOVE the one in the mid $US 250s it established just before the May spike up.

Last week, the shorter-term (20 week) Moving Average crossed above the longer term (40 week) Moving average for the first time since June 2000. That remains the case this week (see the longer-term weekly bar chart here).

We still have the "moving average crossover". We still have solid support for Gold in the mid $US 260s. The past week has been a "disappointment" for Gold followers, if the email we get from subscribers and visitors to our site is any guide. Many people expected Gold to "spike" again now that the Genoa Summit is over.

There are a number of reasons why this has not happened - yet. One of the main ones is the fact that Mr Greenspan has been conducting his semi-annual testimony in the U.S. Congress. As has been reported widely, more and more Fed Governors are straying from the fold and expressing fears about the possible re-emergence of "inflation" (rising prices). Mr Greenspan has steadfastly maintained that he "sees no inflation".

Since Wall Street is betting on another rate cut on August 21, there must be NO obvious signs of "inflation" - especially one as stark as another spike in the $US Gold price.

Here are some of the other reasons:

1. Gold lease rates have been falling continually
2. Recent falls on the $US Index have stabilized
3. Open interest on the COMEX has dropped to its lowest levels of the year, on greatly increased volume - especially over the last three days of the week

Technically, the Gold "picture" has not changed at all this week. Not surprising, since the weekly trading range is almost identical to the trading range of last week.

The things to watch for are a turnaround in lease rates, an increase in open interest on the Comex, and a fall off in daily trading volume on the COMEX. All of these were features of the situation leading up to the Gold "spike" in May.