Gold and the other markets took a bit of a back seat this week, overshadowed by the amazing derring-do surrounding the US government and in particular, the Bush Administration. Mr Bush started the week by doing what a lot of people expected him to do, he nominated Ben Bernanke as Mr Greenspan's successor as Head Fed. The stock markets loved it, for one day. Then the next day (October 25) Gold loved it even more, rising $US 7.80 on the day.
After that, there was the withdrawal of the Meirs nomination to the Supreme Court, the threatened indictment of a gentleman involved with Republican fund raising efforts in Ohio in the lead up to the 2004 elections, and of course the actual indictment of Mr Libby, Vice President Cheney's chief of staff. By the end of the week, Mr Bush had taken himself off to Camp David to recover. Whether his Administration recovers is a moot point.
All in all, Gold had a good week, rising $US 7.80 on a spot future basis. The recent correction saw the spot future price fall from $US 477.10 on October 11 to $US 461.00 on October 20. As of October 28, all but $US 2.30 of that fall has been recovered.
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 $US 7.80 Gold bounce on October 25 pushed Gold back above both its 10 and 20-day moving averages. The 10 day MA did cross back below the 20 day MA, but it is now curving up to meet it again so the crossover might not last very long. That will soon be resolved when we see whether or not Gold can take out the bull market high it set three weeks ago.
On the weekly Gold chart, the price is back near the top of the trading range it has been in for the past six weeks. As you can see, all the earlier "tops" on the chart did not take anything like as long to resolve themselves. With the price now closer to the top of the range than to the bottom, chances are that another new bull market high will not be long in coming now.
On the point and figure chart, the first downside break in its pattern since Gold began its lates rise from the low $US 420s has now been completely recovered. Note the tentative new uptrend line - the dotted green line. This line will become a new uptrend line, and therefore a support line, on any spot future Gold close of $US 480 or higher. That's three "Xs" (on this chart) above the old bull market high.
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.
Last 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). This week, almost all of the correction has been regained.