As you know, this week was a short one for Gold, with the US futures markets closed on Monday and Tuesday (July 3 and 4). Nonetheless, as you can see from the weekly chart to the left, Gold had another healthy gain this week, despite its slight ($US 1.50) fall on July 7.
In the five trading days since June 28, the spot future Gold price in the US has gained $US 56.50 or almost 9.8%. That's quite a snap back, understandable given the magnitude and quickness of Gold's fall since its 2006 highs set back in mid May. What we have now, of course, is potentially a pretty big trading range given the fact that Gold fell (in round numbers) from $US 720 to $US 560 and has now recovered to be trading just below the mid point of that range.
Last week, the Fed raised rates. This week, the European Central Bank and the Reserve Bank of Australia (the Aussie Central Bank) met and left their rates alone. How long this "reticence" will last is anybody's guess, but the BIS (Bank for International Settlements) has come out and stated that Central Banks will have to move faster and raise rates higher than many now anticipate (we covered that here last week).
With the July 4 holiday having come and gone, and with the soccer World Cup wrapping up this weekend in Germany, the traditional (northern) "summer doldrums" are now upon us. Next weekend, the G-8 Heads of State Summit is on in St Petersburg, Russia. The communique is almost certain to be as bland as always, but the "back room" bargaining is going to be intense.
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, Gold regained the plus 100% level in the bable above. That percentage has improved further this week, with the equivalent figures for the $US index (USDX) and the Dow having worsened slightly.
On the daily chart, the Gold price snapped back above both its 10 and 20-day moving averages last week with the shorter-term average now beginning to curve up towards its longer-term counterpart. This week, the 10-day average has crossed back above its 20-day counterpart. That was the second pre-requisite, after Gold having found support, for a resumption of the bull market.
On the weekly chart, Gold crossed back above its 20-week (100 day) moving average (MA) last week and has regained its shorter-term 10 week MA this week. As long as the 10-week MA remains above its 20-week counterpart, the upward acceleration of the Gold price which began back in late 2005 is still intact. The next step is for Gold to get back above BOTH MAs.
The $US 2 x 3 point and figure chart now has a clearly established base and a sizeable upside break from that. The green trendline on this chart represents the steepening of the bull market which began late last year. It is quite a long way above the current Gold price at about the $US 670 level. In spot future closing terms Gold's recent correction took the price from $US 721 to $US 562. At its spot future close of $US 636.30 on July 6, Gold had thus far recouped almost one-half (47%) of the correction.
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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As always, we refer you to the strategic $US 5 x 3 point and figure Gold chart for an overview on the situation.
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 came, with a vengeance, 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"! Last week we have an upturn on the chart - right around the double top from which the March-May surge broke out.
As we said here two weeks ago two weeks ago - "The first resistance point on this chart is the top of the upchannel around the $US 615 level. The $US 27 surge on Friday, June 30 brought Gold to $US 616, right at that level. Now, with Gold almost $US 20 higher, we are back above the TOP of the upchannel and about halfway back to the May high. Let's see how much of the rest of the move Gold can fill in before there's another downturn.