Two weeks ago, the US Treasury's had its quarterly "refunding" auctions and Gold took a swan dive from the low $US 570s to just below the $US 540 level. Last week, on February 16 to be precise, the US Treasury's debt subject to limit hit the debt ceiling. And this week, Gold has had a sudden spurt at weeks end, rising $US 10.30 on February 24 to close the week at $US 558.90.
The support point just below the $US 540 level has held. Gold is now closer to early February high ($US 572.50) than it is to its lows set two weeks later. As the $US Gold price rises, it gets more "volatile".
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 Gold price jumped back above its (10 day) moving average early in the week and jumped above longer-term (20 day) counterpart with the $US 10.30 rise on February 24. This is the first sign of the end of the correction. We now wait to see when (or if?) the short-term MA can move back above its longer-term counterpart.
On the weekly chart, the similarity between the correction in mid December and the current correction is also apparent. Last week, the price fell back to the 20-week MA - just as it did in December. This week, the price has bounced higher, just as it did to signal the end of the December 2005 correction.
The $US 2 x 3 point and figure chart is still showing a classic "correction" pattern, a series of descending highs and descending lows. To break this patter, Gold is going to have to keep moving up to the mid $US 560s. To confirm a new upleg on this chart would require a spot future close of $US 578 or higher.
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 Gold has regained a 100% plus gain since its 2002 lows this week.
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. In January 2006, it 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.
The recent correction has given us a third downturn on the chart, and the second since Gold broke above its $US 510 ceiling (for the significance of this, please see our main Gold This Week commentary. The $US 10.30 jump on February 24 gave us the upturn. Now, we wait to see how long it will take to breach the $US 572.50 bull market high set on February 3.