Last week, the spot future Gold price rose $US 6.00. This week, it rose another $US 5.40, most of that coming on August 17 when Gold put on $US 4.10. The intra-day spread for the week - again on a spot future basis - was high $US 280.80 - low $US 275.00. In less than two weeks, spot future Gold has progressed from holding on to a support zone in the mid $US 260s to challenging the $US 280s. The spot future close on August 17 of $US 279.30 was the highest Gold has closed since May 25.
We are sure you will agree that ALL the charts look very pretty indeed!
Again, we draw your attention to the weekly bar chart. Note the support zone in the mid $US 250s before the May spike and the support zone in the mid $US 260s after it. That mid $US 260s support zone took more than two months to form. The reason that we could be almost certain it would hold was that the shorter-term (20 week) moving average crossed above the longer-term (40 week) one in the week ending July 13. Now, a month later, Gold has risen by $US 11.40 or 4.26% in two weeks.
As we stated here last week: "This "crossover" of moving averages on the weekly chart is VERY important. First, it is a prerequisite for any kind of a sustainable BULL market that the shorter-term rate be ABOVE the longer-term rate. Second, the "crossover" in mid-July is the first time that this situation has been present on the weekly Gold chart since June 2000."
EVERYTHING is now coming together in a favourable outlook for Gold - SPECIFICALLY $US Gold. The $US Index has fallen nearly 7% over the past six weeks. This fall is threatening to curtail the flood of foreign funds which has underpinned the U.S. economy for most of the past decade. It is also putting severe constraints on the ability of the Fed to go on lowering U.S. rates.
On the Comex, open interest has revived with a rush. After spending two days (August 8 and 9) BELOW the 100000 level, total open interest has surged to 123000 over the past week. We have the moving average crossover mentioned above. $US Gold has established a series of ASCENDING support zones for the first time since the 1999 Washington Agreement Gold spike. Technically, the situation is well nigh PERFECT.
Technically, the final "ingredient" would be an upturn on the $US 5 x 3 Gold chart. We would get that on any spot future Gold close of $US 280.00 or higher - only $US 0.70 above where Gold closed on August 17.
The potential for a Gold "spurt" is increasing daily. If Gold can get above the high spot future close it set on May 18 ($US 287.80), then the only MAJOR hurdle is $US 300. Above that, we have a BULL market. All the signals needed for $US Gold to take a concerted push towards $US 300 are ALREADY in place. The trigger could well be another rate cut on August 21. And if the Fed DOESN'T cut rates, thereby admitting that they have "hit the wall" in regard to their ability to stimulate the U.S. economy, then the trigger could be pulled even harder.
At the very worst, almost all downside risk has now been washed out of the $US Gold price. At best, we will be writing about plus $US 300 Gold in the very near future. Stay tuned.