Gold actually had a "down" week this week in $US terms, the first time that's happened since the week of August 15-19, almost two months ago The fall on the week was $US 5.50. The fall from the bull market spot future closing high of $US 477.10 set on October 11 was $US 7.90. That's a little under 1.7%.
Of course, the louder the chorus from the mainstream media about the "possibility of Gold climbing to $US 500 by the end of the year", the more headwind Gold is running into. There is good technical reason for the "baulking" short of $Us 480 too. Take a look (or another look) at the $US 5 x 3 Point and Figure Gold chart. You can see that Gold is now challenging the line drawn through the 1983 and 1987 highs.
This line is anchored at $US 510, a price that Gold has not equalled since it reached it at the end of January 1983 - nearly twenty-three years ago. Its connecting level is $US 495 (on the chart), a price that Gold has not equalled since it reached it in December 1987 - nearly eighteen years ago. That's a long-term base to draw any trendline on. Small wonder Gold is having "trouble" at its present levels.
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 gold has now diped below the 20-day moving average (intraday) for the first time since "pre-Katrina" in late August. At its close for the week, the price and the 20 day MA are almost identical. This is the only chart where there is any hint of a proper "correction". We can expect one if and when the 10 day MA crosses back below the 20 day MA, and that hasn't yet happened.
On the weekly Gold chart, the sequence of higher weekly intra-week highs remains unbroken, with the new bull market high spot future close of $US 477.10 on October 11. We have had the first "down" week for nearly two months, but there is NO sign of any weakness yet appearing on this chart.
The situation is the same on the point and figure chart. What we can see here is that there has been a loss of momentum as Gold exceeded its old bull market highs ($US 456 set last December) and pushed above $US 470 and towards $US 480.
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 is much more than 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 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. That bull market high lasted a little over nine months. On September 16, a new bull market spot future Gold closing high was established when Gold went above $US 460.
Gold has now reached $US 475 on the $US 5 x 3 chart. That puts the $US 5 x 3 Gold chart four 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.
We repeat the observation made above. Gold is now bucking the trendline anchored in the 1983 and 1987 highs. It will have to get through this one first, and an interim correction of some magnitude may be necessary. That remains to be seen. The BIG resistance (similar to the 1000 level which held the Dow back between 1966 and 1983) remains at the $US 500-510 level.