While the spot future Gold price close is up by $US 4.80 this week and set a new high of $US 562.50 on January 25, the intra-day high for the bull market remains $US 568.50 which the spot future price reached early last Friday - January 20.
This seems to be worrying a lot of people: "Gold didn't make a new high this week! Maybe a correction is coming!? Maybe the market's topped!!?". It's true, the price has been going sideways all week on the daily chart. And on the weekly chart, the intra-day high is indeed below the high for the previous week for the first time since the bottom of the correction in mid December. The 20-week moving average on the weekly chart hasn't even reached the $US 500 level yet (the price hit $US 500 at the beginning of December) with Gold skating around the $US 560 level.
A correction must certainly be coming. Well, we do agree with this statement. A correction is always coming in any bull market. Always has, always will. There have been many corrections since this bull market got started back in 2001.
The whole point is that a correction is precisely that. It is a situation in which a price goes against the trend. In a bull market, that is a falling price. But a correction - if it IS a correction - is a temporary phenomenon. How does one know that a bull market has been through a correction? One knows when the falling price is reversed and the subsequent rise takes prices higher than they were at the point from which the correction began. If that doesn't happen, then what is occuring is NOT a correction, it is a potentially topping market.
One can say that a market has potentially topped when prices fall, then rise but fail to regain their previous highs, then fall again to a point lower than they fell the first time. One can say that a market has probably topped when all this is followed by prices which fall BELOW the trendline which supported the bull market. One can say a market has certainly topped when prices distribute below this trendline and then break lower still.
How close are we to such an event happening to the Gold price. No one can know that. But what we DO know is that there is not an iota of evidence on any of these charts that such a thing is even on the horizon. Correction? Sure, they can happen at any time. Remember Gold at $US 456 back in December 2004? It took NINE MONTHS, until mid September 2005, until that high was decisively breached. Only then could what had happened between December 2004 and September 2005 be decisively identified as a correction.
The more recent corrections have proven themselves to BE corrections is weeks. That's an infallible sign that the bull market is strengthening. And that's where we are now.
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:
|
The daily and weekly bar charts have already been covered in remarks above.
There are no signs of weakness whatsoever on the $US 2 x 3 chart here, On a closing price basis, the uptrend is perfectly intact and shows no signs at all of not remaining that way.
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:
|
For the second time in the past three weeks,the spot future Gold price is showing a rise of more than 100% from its 2002 lows.
The spot fuure Gold close peaked in December 2004 in the mid $US 450s and took NINE MONTHS - until mid September 2005 - to exceed those highs. The spot future Gold close peaked in December 2005 at $US 528.40. Less than a month later, it has smashed that 2005 high to ribbons. We do NOT expect a rerun of last year with Gold in the doldrums for the first nine months. We certainly haven't had that in January.
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, with spot future Gold having neared $US 570 intraday, it has established a new upleg on the $US 5 x 3 chart. This is final confirmation that Gold has consolidated above $US 500 and above its 1981-2005 $US 300-500 trading range. Technically, EVERYTHING is in place for the upwards acceleration of the Gold "price" - in terms of all paper currencies - in the year to come. If the first month is anything to go by, we are in for a fun time this year.