A month 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. Three weeks ago, on February 16 to be precise, the US Treasury's debt subject to limit hit the debt ceiling. Last week, Treasurer Snow 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.
This week, Gold has done an almost perfect repeat performance of its performance a month ago. It has swan dived from $US 570 to just above the $US 540 level - on a spot future closing basis. On an intraday basis, spot future Gold got as low as $US 534.50 on March 10.
The Senate has a week to raise the Treasury's credit limit - the Congress rises for their Easter recess on March 17 - unless they don't. Obviously, either the limit will be raised or the limit done away with once and for all. The former choice is much more likely. While there was a lot of talk about the "anachronism" of the debt ceiling before the previous two raises, there has been no such talk (not in public anyway) surrounding this one.
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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Last week, the shorter-term (10 day) moving average on the daily chart crossed back above its longer-term (20 day) counterpart. This week, you can easily see the similarity with the events of three weeks ago as the Gold price has dived from the top to the bottom of its trading range. Barring a very abrupt turnaround, the shorter-term average will cross back below its longer-term counterpart sometime in the next two weeks.
The major new development on the weekly chart is that the Gold price has dived below its shorter-term (20 week) moving average this week - for the first time since last October. This is a strong indicator that the current correction is going to be longer-lived than was the previous one and may well go deeper than the previous one did.
The situation on the $US 2 x 3 point and figure chart is very clear. The current correction is almost identical to the previous one but has not yet found support. An upturn from present levels will signal a $US 30 trading range between $US 540 and $US 570. Further weakness without an upturn will mean that a trading range has not yet been established. Below current levels, the next support points come in the $US 525-28 region.
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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You can see the abruptness of Gold's recovery from its mid-December and mid-February corrections on the strategic $US 5 x 3 point and figure Gold chart. But now we have another correction with a difference. This time, Gold has turned down on this chart from the same level ($US 570). That gives us a double top on the chart.
Last week, Gold had equalled its early February highs on the $US 5 x 3 chart. Another upleg on this chart would have been signalled by a spot future Gold close of $US 585 or higher. This week, we have a double top. That signals at best a longer period before the highs are challenged again. It may well also signal that the current correction has further to fall. We'll see.