Three 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. Two weeks ago, on February 16 to be precise, the US Treasury's debt subject to limit hit the debt ceiling. This week, Treasurer Snow has informed the US Congress that the Treasury will run out of borrowing capacity by March 20. And on March 2, the spot future Gold price regained the $US 570 level.
Thus, in just over two weeks, Gold has gone from a support point just below the $US 540 level to almost, but not quite yet, regain its early February bull market highs. Silver (the poor man's Gold) is at new bull market highs this week, having broken above the $US 10 level for the first time in twenty-two years.
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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The most important feature on the daily chart is the fact that the shorter-term (10 day) moving average has crossed back above its longer-term (20 day) counterpart. With the price now comfortably back above both MAs, we now have all the pre-requisites for another bull market high - resistance of course being at the old bull market high of $US 572.50 (spot future closing basis).
On the weekly chart, the Gold price has been supported by its shorter-term (20 week) moving average just as it was during the last correction in December last year. Gold has not challenged its longer-term (40 week) moving average since the price was below the $US 440 level - well over $US 100 below present prices - back in the late northern summer of 2005.
The situation on the $US 2 x 3 point and figure chart is simplicity itself. If the spot future Gold price rises to $US 578 or higher (3 clear "X"s above its previous high) we will be able to add a new and very steep uptrend line to the chart. This line would be anchored by the recent correction lows of $US 540, which would come the new Gold "support point" on this 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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Please note that Gold shows a 100% plus gain since its 2002 lows. Note also that the percentage gain in Gold is almost exactly four times as big as the percentage loss on the $US index.
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 over the first two months of this year.
You can see the abruptness of Gold's recovery from its mid-December and mid-February corrections on the strategic $US 5 x 3 point and figure Gold chart. Take a look at the duration of the last three "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 turned down on December 16 and turned up again twelve days later on December 28. It turned down on February 7 and turned up again on February 24.
Note that Gold has now equalled its early February highs on the $US 5 x 3 chart. Another upleg on this chart would be signalled by a spot future Gold close of $US 585 or higher - three clear "X"s above the previous high.