This was a "recovery" week for the $US Gold correction, but it was far more for Gold itself. By November 11, Gold was at new bull market highs in terms of almost every other major currency in the world. And this time, that includes at least one of the "commodity currencies", the Aussie Dollar. On November 10, $A Gold broke above a bull market high which had stood since February 4, 2003.
Last week, there was "sustained fund selling" on the US Gold futures markets. That was last week. This week, Gold has recovered more than half of its $US correction losses, and all in the face of a $US Dollar index which has set new 2005 highs almost every day this week.
Last week, the Fed raised rates again and the ECB didn't. The $US index broke through the 91 level for the first time since May 20, 2004, more than a month before the Fed STARTED raising rates. The impetus is partly the continuing repatriation of capital back to the US - intensified by the "problems" at Refco, partly the higher US official rates, and partly the reported third quarter US "growth" figure of 3.8%. This week, the rise in the $US continued, but the $US Gold price turned around and went up right along with the Dollar.
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, last week's $US 16.90 Gold fall pushed Gold well below both its 10 and 20-day moving averages. The $US 11.50 rise this week has reversed the process. Note however that the shorter-term moving average has crossed back below the longer-term one again.
On the weekly Gold chart, you can see that Gold is right back in its nearly two month old trading range of roughly $US 460 - 477 after having broken it to the downside last week when it closed at $US 457.90 on November 4. As you can see, all the earlier "tops" on this chart did not take anything like as long to resolve themselves. The old bull market highs ($US 456) have provided support.
On the point and figure chart, a new tentative uptrend line - the dotted green line - has been added, now that solid support has been found a little below the $US 460 level. We won't get a solid uptrend line on this chart unless and until the Gold price can surpass its $US 477 level of October 11. On this chart, spot future Gold needs to close at $US 480 or higher to do that.
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. Then, by October 11, a new bull market spot future Gold closing high was established when Gold went above $US 475. That re-confirmed the uptrend line on the chart.
Last week, Gold closed at $US 457.90. That turned the $US 5 x 3 chart down. Please note where the downturn occurred - right on the line connecting the 1983 and 1987 bull market highs.
The last time that the $US 5 x 3 chart turned down was on July 5, 2005. It took about six weeks, until August 11, 2005, to turn it up again. We'll see how long it takes this time. Anything less than that would be VERY encouraging and at its November 11 close of $US 469.40, Gold is only $US 5.60 from turning up on the chart.
The thing to continue to stress is that the strategic Gold bull market as shown on the $US 5 x 3 chart is perfectly intact with an uptrend line which has been confirmed and RE-CONFIRMED since December last year.