This week saw the first "up week" for Comex Gold since the week ending on May 12. That was the week when the Fed's FOMC last met - on May 10. This coming week will be the week when the FOMC meets again - on June 28-29. The intervening six weeks has seen a large correction in commodities and precious metals prices in lock step with an about face on future interest rate expectations.
As you probably know, there has been an explosion of official rate rises all over the world since mid May. In the US, the attitude has swung 180 degrees from complacency about the end of rate rises being imminent in early May to a slowly growing fear that the Fed might have to go on raising rates beyond this upcoming June meeting and perhaps even further than the next meeting in August.
The initial reaction has been knee jerk. Since the Fed is going to go on raising rates, the Dollar will strengthen because of the higher yields payable on Dollar denominated assets. This knee jerk reaction, as it always does, totally blanked out any effect which higher rates might have on the US economy. What is slowly starting to emerge now is the realisation that this sudden outbreak of rising rates all over the world is not a sign of currency "strength" but of precisely the opposite. And, as this realisation dawns, the Gold correction has found its first firm support point - in the mid $US 560s.
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 percentage gain in Gold on this table dipped below the 100% level for the first time in two months. It remains there this week, but as you can see, it still makes mincemeat of the other two items in the table.
On the daily chart, Gold has moved back above its longer-term (20 day) moving average this week and is now more than $US 20 above its June 14 spot future closing low of $US 562.30 set on June 14. While there's no "definitive" bottom on this chart, the price now has room to move without taking out recent lows. That's the first step in a bottom being established.
On the weekly chart, the first "up" week this week is clear after five "down" week in a row. Three weeks ago, Gold crossed below its 10-week moving average. Last week, it plunged beneath its 20-week (100 day) moving average, which currently stands just above the $US 602 level. The upmove since then is the first confirmation that the climactic drop on June 13 is 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. After had a five week ecorrection, the first upturn on this chart occured last Friday (June 16). This week, we got the second one, from a point higher than the first one.
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 on May 12: "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. The chart went up $175 in a straight line and then went down $155. Now that's "volatility"! Now we have an upturn on the chart - right around the double top from which the March-May surge broke out. The first resistance point on this chart is the top of the upchannel around the $US 615 level.