Early this week, the Gold markets got a "scare" as spot future Gold fell a whole $US 2.90 on Monday, October 3. Ever since Gold broke above its old bull market highs three weeks ago, there has been a litany of "cautionary tales" from Wall Street pundits of all descriptions. When Gold stopped going up, the nervousness peaked. But it didn't last very long. After the minor dip in the spot future close on Monday, the close didn't move at all for two whole days. We cannot remember the last time that the spot future Gold price closed unchanged for two days in a row.
One illustration of the size of the scare over Monday's fall came on global stock markets where Gold stocks were madly sold off along with everything else. Taking The Privateer's XGO Index as an example, it swooned by 7.2 percent between October 3 and October 6 before recovering some ground at the end of the week.
The "scare" was very short-lived, however. By the end of the week, the $US spot future Gold price had recovered all lost ground and gone on to post a new bull market (and post 1988) high of $US 474.70. The performance was even better in terms of many other major world currencies. For one example, take a look at the Gold chart in terms of Japanese Yen. Wow!
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 is well over double the $US fall a trade weighted ($US index) basis.
On the daily chart, you can see that the dip below the 10-day moving average last week didn't last long. On an intraday basis, Gold retreated to levels just above its previous $US 456 bull market high last week. That's where the support came in, and the spot future price has now rebounded to new highs. If the "correction" is now over, it sure didn't last long.
On the weekly Gold chart, look at the takeoff which has occurred since the chart dipped back to just touch the confluence of its 20 and 40 week moving averages at the end of August. This came a month after the trendline which has its roots way back in 2001 was confirmed for the second time this year. These are powerful technical signals, and Gold has reacted accordingly. It continues to react accordingly
On the point and figure chart, there has been no correction at all, just a couple of shallow downturns. Remember that unlike the bar charts, this chart only takes CLOSING spot future prices into consideration. So far, about the only thing illustated on this chart, apart from the perfectly intact bull market, is that the upside surges have lost some momentum since Gold first challenged the $US 470 level.
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 rise in the $US Gold price not far of being triple 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 was established on this chart when Gold broke above the $US 440 level in November 2004. In doing so, the Gold price rose to three clear "X"s above its previous (February - April 2004) highs. That established the uptrend line
After that, Gold reached $US 456 in early December 2004. Two weeks ago on September 16, that level was exceeded when spot future Gold closed above $US 460.
On September 29, Gold has closed above $US 470 (at $US 472.30 on a spot future basis). That puts the $US 5 x 3 Gold chart three clear "X"s above its previous (December 2004) bull market high and RE-CONFIRMS the uptrend line established when Gold closed above $US 440 in November 2004. It has taken nearly a year, but the NEXT leg of the $US Gold bull market is now fully confirmed.
At the spot future close of $US 474.70 on October 7, we are only $US 0.30 away from tacking another "X" onto the chart. However, the important $US 470 level has already been reached. Above that, the BIG resistance will come in the $US 500-510 area.