A cursory glance at the daily Gold chart to the left is enough to see that things were "different" this week. And so they were. The US Treasury had to get through a "refunding" auction with its debt (on a "to the penny" basis) ABOVE the debt limit of $US 8.184 TRILLION. It also had to re-introduce the debt buying institutions to the 30-year bond, an item which has been off the Treasury's shelves since 2001.
They negotiated the hurdle successfully, and in the process took a run at a Gold price which has risen more than $US 100 since Mr Bernanke was nominated as Fed Chairman back in late September last year. By the end of the week, Gold was "whipsawing" - up $US 14 on February 9 only to drop $US 14 on February 10.
This is what we said on this page last week:
"The concern is, of course, that the governments/Central Banks are poised to pounce and decimate the Gold price and are waiting for the right opportunity to do so. There is no argument over the fact that they would LIKE to decimate the Gold price. There is increasing questions over their ability to do so, no matter how much they would like to."
It wasn't so much a question of "opportunity" this week, more a question of naked necessity. The $US 19 break on the Gold price on February 7 shows the capacity is still there, as is the willingess of the major financial "institutions" to go along. The Gold price dives on February 7 and 10 were universally described as the result of "fund selling".
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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On the daily chart, the price has dipped below the longer-term (20 day) moving average for the first time since the correction of mid December. That one, if you recall, was caused by the Japanese authorities sharply raising the margin requirements for Gold futures trading in Japan, among other things. That one lasted about two weeks. But now, the MAIN PLAYER, the US futures market has stepped in. If this one doesn't work, there's nowhere else to go.
On the weekly chart, the price has dipped sharply back towards its shorter-term 10 week moving average with the pullback this week. As you can see, the "Japanese pullback" (see the preceding paragraph) stopped right at that MA. Lets see what happens to this one. The 10 week moving average currently stands just above the $US 538 level .
The $US 2 x 3 point and figure chart is showing the first signs of weakness since the BIG push above the $US 500 level began. Support lies at present levels around $US 550 and below that, at just below the $US 540 level - the same level as the 10 week moving average on the weekly bar chart.
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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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 we have a third downturn on the chart, this one from the $US 570 level. We'll see how long this one takes to turn around and what happens when it does.