Gold has had a second "down" week in a row, even though the $US 6.00 rise in the US on October 21 wiped out most of the week's losses. In fact, the fall this week was only $US 2.20, much less than the fall last week which was $US 5.50.
With Gold having closed the week at $US 467.00, just over $US 10 below the bull market high (on a spot future closing basis) of $US 477.10 set on October 11, the US Dollar just continues to rise and rise. On October 21, the $US index rose 0.42 points to close at 90.18. This is only the eighth close above the 90.00 level this year and only 0.15 below the 2005 high of 90.33 set on July 5. When that $US high was set on July 5, Gold closed at $US 423.90. It is now $US 467.00. That's a pretty good performance.
We go into detail on the reason WHY the $US Index is going up in the Late October issue of The Privateer (Number 538 - published on October 23). Suffice it to say that the impetus behind the $US rise cannot be indefinitely prolonged. The fact that enough people know this is the main reason why Gold has performed so well lately despite the rising $US.
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 spent (most of) the week trading below the 20-day moving average after the "big" $US 8.60 fall on October 19. The longer that Gold consolidates below its recent highs, the bigger the chance that the the 10 day MA will cross back below the 20 day MA. That would signal a genuine correction on this chart, but it hasn't happened yet.
On the weekly Gold chart, the sequence of higher weekly intra-week highs was broken this week, for the simple reason that this was the first week in over a month when Gold did NOT register a new bull market high spot future close. Apart from that, the chart is still completely intact.
The point and figure chart has seen the first downside break in its pattern since Gold began its lates rise from the low $US 420s. What has to be determined now is whether the recent range between $US 470-80 will prove resistance, how long this resistance lasts, and what level Gold descends to before it successfully breaks through it. On this chart, the obvious support point is the old December 2004 bull market highs in the mid $US 450s.
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.
This week, spot future Gold closed at $US 461 on October 20. That almost, but not quite, caused a downturn on the $US 5 x 3 chart (a close of $US 460.00 or lower is necessary for that to happen). Even if it does happen, Gold has already confirmed the next upleg on its bull market. As usual, we'll wait and see.