On February 20, 2001, the spot future price of Gold closed at $US 256.10. Six weeks later on April 2, 2001, it closed $US 0.50 lower at $US 255.60. These levels, slightly ($US 2-3) higher than the lows of August 1999, marked the END of an eighteen month bottom formation for Gold and the beginning of what is now a nearly five-year old bull market. At its spot future closing high of $US 528.40 on December 12, 2005, Gold had risen by a little over 100% (107.6% to be exact). At its 2005 close of $US 518.90 on December 30, its bull market rise to date is 103.0%.
A doubling of prices over a nearly five year time span is a pretty leisurely pace for any major bull market. But one must consider that it took Gold a whole year to rise from its bottoms in the mid $US 250s to consolidate above the $US 300 level. This $US 300 plus consolidation was actually the start of the bull market for real. For eighteen years, from late 1979 to late 1997, the $US 300 level had been the FLOOR for the $US Gold price. As seen in the table below, it took Gold from November 1997 to the end of March 2002 to once again establish itself above that floor.
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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What the ensuing three years and nine months (March 2002 - December 2005) have brought us is Gold working its way through a $US 300 - $US 510 trading range which stretches all the way back to early 1981. At the beginning of this month, Gold closed above the $US 500 level for the first time since early 1983. By December 12, Gold closed at $US 528.40, a clear break ABOVE its trading range of the previous 24 years.
Then, of course, we had a quick and steep correction as the Japanese authorities sharply tightened the rules on their Gold futures market. Not so coincidentally, in our not so humble opinion, this tightening coinceded with the last meeting of the year of the Fed's FOMC (Federal Open Market Committee) and the latest in a long string of 0.25% US rate rises. A surging Gold price could not be allowed to affect this event, especially since there was a change in the wording of the press release which accompanied the announcement of the rate rise, one which gave hope to Wall Street that the US rate rises might be coming to an end.
Since then, of course, the $US Gold price has performed an abrupt turnaround and has now regained almost three-quarters (73.2%) of its December 12-21 correction. Most of this rise has taken place in the 3.5 trading days since Christmas - in the face of a RISING US Dollar as measured by the $US index.
You can see the abrupt turnaround on all the charts on this page.
Remember, Gold peaked in December 2004 in the mid $US 450s and took NINE MONTHS - until mid September 2005 - to exceed those highs. Gold has peaked in December 2005 at $US 528.40 and now, less than three weeks later, it has already recovered three quarters of its correction. Another week like the week just past in the first week of January 2006 and $US Gold will be at new bull market highs. Now THAT would be a good start to 2006.
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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One last measure of the abruptness of Gold's recovery from its mid-December correction can be seen on the strategic $US 5 x 3 point and figure Gold chart. Take a look at the duration of the last two "DOWNTURNS" in the data accompanying this chart. The chart turned down on November 4, 2005 and turned up again twelve days later on November 16. It had its most recent downturn on December 16 and turned up again twelve days later on December 28. By the measure of any of the previous downturns on this chart, the most recent two have been resolved VERY QUICKLY INDEED.
Now, here we are at the end of 2005, with the $US Gold price up 18.4% on the year despite the fact that the $US itself as measured by the $US index is up 12.3% on the year. As we enter 2006, we wait to see how long it takes Gold to again set a new bull market high, beating the $US 528.40 spot future close of December 12. Remember, Gold is now "consolidating" ABOVE a trading range ($US 300 - $US 510) which is nearly a quarter century old. When markets break above LONG STANDING trading ranges, they tend to go much higher much more quickly.
To you and yours from all here - A VERY HAPPY NEW YEAR!!