We must confess that we were surprised to see the spot future Gold price scorch all the way up to $US 721.50 on the close ($US 728.00 intraday high) on May 11. This is a good $US 10 above the LAST resistance point for Gold short of the $US 850 all time high set in January 1980. In September 1980, Gold reached $US 710-12 at the top of a five month rally which began from the $US 480 level set in March. That $US 480 level was the bottom of Gold's first precipitous fall from its January 1980 highs.
Thus, we were not at all surprised to see the spot future Gold price come back to those September 1980 highs by the close of the week's trading on May 12. Even though Gold hasn't been this high in almost 26 years in US Dollar terms, there are always people around who want to "get out even" no matter how long they've waited to do it. Sadly, anybody who bought Gold at $US 710 in September 1980 is not REALLY getting out even by selling it at $US 710 in May 2006. In 2006, $US 710 buys a LOT less than it did in 1980.
That, of course, is the problem. The reason why Gold has been going up so precipitously over the past month and has accelerated its bull market so much since last last year is that the problem has begun to be realised by many more people, both inside and especially OUTSIDE the US. In nominal terms, about the only prices which are still below where they were in 1980 in $US terms are Gold and Silver prices. They are only now BEGINNING to "catch up" with everything else.
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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Look at the percentage increase on the Dow in this table. Compare that to the fall in the US Dollar index - let alone the rise in the $US Gold price. Yet Wall Street was all agog on May 10, trumpeting the fact that the Dow has now closed to within 80 points of the all time high it set almost six and a half years ago in January 2000. The mind truly boggles.
On the daily chart, as on all the other Gold charts - no matter what currency you chart Gold in - the rise is simply steepening. Whereas there were daily falls of $US 10 plus in both of the last two weeks of April, Gold had only its second daily fall in May on Friday, May 12.
Of course, the pattern is replicated on the weekly chart. This chart shows the ever accelerating rise since the middle of 2005 and the huge increase over the past six weeks.
The $US 2 x 3 point established a new and much steeper uptrend line in early April anchored at the $US 540 lows. The steepening of an uptrend usually (there is no such thing as "always" in technical analysis) signals an acceleration of the uptrend. Take a look at the chart. With the exception of a short lived "consolidation" just above the $US 620 level, Gold has gone up $US 180 since then. The downturn caused by the $US 9.70 fall on May 12 was the first since the "consolidation" already mentioned and came from a level $US 100 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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On the strategic $US 5 x 3 point and figure Gold chart, the metal has now risen $US 175 in a straight line with no corrections or even downturns whatsoever. This is a textbook technical example of what often happens when the TOP of an upchannel is penetrated in a bull market.
Look at the MASSIVE acceleration on this chart since it broke above the broken red line connecting the 1982 and 1987 highs. Look at the even more massive acceleration since the chart "double topped" at the top of its channel. Finally, look at the massive ($US 250 - 500) base from which this price surge has grown.
We don't know where the next downturn on this chart will take place. It may well take place from $US 720 since Gold has now reached the last but one of the resistance points on the way to its all time $US 850 high. We'll see. But whatever happens, the bull market is - to put it mildly - perfectly intact.