Last week, flanked by a mini stock market crash and gyrating currencies, no less than six major Central Banks (including the ECB) raised their rates. This week, the effect was not long in coming. June 13 was the day it all came to a head. In a month, the attitude on Wall Street has gone from complacency about the Fed being finished raising to the reluctent admission that they were going to raise at the end of June to a horrified contemplation that they might keep on going after that.
Then came the first week of June, with seven Central Banks raising rates. Then came this week and the fear of debt exploded into a massive sell-off which affected almost every market everywhere in a stampede into "liquidity" - aka literal CASH. As the most liquid and easily saleable of "investments, Gold was pummelled, falling $US 44.30 on the day. Silver dived $US 1.44. The stampede into cash carried all before it.
How long this phase lasts is impossible to predict, but the BIG dump in Gold and Silver prices would indicate that the correction will not be made up as quickly as have corrections over the past year or so. Having said that, a stampede out of paper currency denominated instruments into the paper currency itself brings us one step closer to a stampede out of paper currencies.
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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For the first time since April 21, the percentage gain in Gold on this table has dipped below the 100% level. As you can see, however, it still makes mincemeat of the other two items in the table.
Despite the almost $US 16.00 upturn on Gold since the savage selloff of June 13, there is still no solid support point on the daily Gold chart.. Yes, we have the first signs of support at the low $US 560s level where Gold closed on June 13 and 14. The price is still considerably beneath both moving averages, however.
On the weekly chart, Gold shows its fifth down week in the correction despite the "bounce" late in the week. Two weeks ago, Gold crossed below its 10-week moving average. This week, it has plunged beneath its 20-week (100 day) moving average, which currently stands just above the $US 600 level. We await confirmation as to whether the climactic drop on June 13 will be the point at which the chart develops support.
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. The acceleration duly occurred. Now, we have had a five week (and counting) sever ecorrection. Last week, we listed two support points on this chart $US 600 (the "round") number and $US 580. As you can see, this week the Gold price has dropped below both, although nearly regaining the $US 580 level by week's end.
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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By May 11, the strategic $US 5 x 3 point and figure Gold chart had risen $US 175 in a straight line with no corrections or even downturns whatsoever. There had not been a rise like that since the very late stages of Gold's final push to its January 1980 $US 850 high.
Look at the MASSIVE acceleration on this chart since it broke above the broken red line connecting the 1982 and 1987 highs. Look at the even more massive acceleration since the chart "double topped" at the top of its channel. Finally, look at the massive ($US 250 - 500) base from which this price surge has grown.
As we said here a month ago: "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."
The downturn has come - from the $US 720 level. Now, the Gold price has re-entered the channel which confined the bull market until the breakout in late March this year. It has now come down to the double top which immediately preceded the HUGE upsurge of late March - mid May. At its close of $US 578 on June 16, the Gold price is $2.00 below the $US 580 level which would force an upturn on this chart. We'll wait and watch.