As of July 14 and its spot future close of $US 668.00, the US Gold price has now regained almost precisely two-thirds of its mid May - Mid June losses which saw the spot future close plummet from $US 721.50 to $US 562.30. Given the fact that all other major corrections in the Gold bull market thus far have taken six to ten months to recover, this is extraordinarily rapid going.
Two weeks ago, the Fed raised rates. Last week, the European Central Bank and the Reserve Bank of Australia (the Aussie Central Bank) met and left their rates alone while the BIS (Bank for International Settlements) came out and stated that Central Banks will have to move faster and raise rates higher than many now anticipate.
This week, the last major holdout, the Japanese, joined the party. For the first time in six year, Japan has an official interest rate as the Bank of Japan "raised" their official rate from 0.00% to 0.25% on July 14. The "extent" of the rate rise is not relevant. What IS relevant is that the global drive towards higher interest rates is now truly global. What is also relevant is that none of the nations which are raising rates can actually "afford" to do so.
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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Significantly, Gold's upward trajectory continued this week despite the fact that the US Dollar (as measured by the $Us index - USDX) was up on the week by more than a point.
On the daily chart, the Gold price snapped back above both its 10 and 20-day moving averages two weeks ago. Last 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. The last pre-requisite, or course, is a new high spot future closing price - above the $US 721.50 set on May 11. That one may be closer than we think.
On the weekly chart, Gold crossed back above its 20-week (100 day) moving average (MA) two weeks ago and regained its shorter-term 10 week MA last week. This week it has leaped back above that shorter-term MA. 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 $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. As you can see, the current Gold price has now almost regained that level. A cross back above that line would be bullish. If Gold stays above that line on any subsequent correction short of its May high, that would be VERY bullish. We watch and wait.
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 and the Gold price re-entered the channel which confined the bull market until the breakout in late March this year. Now, it has well and truly broken above the upchannel again.
As we said here three weeks ago - "The first resistance point on this chart is the top of the upchannel around the $US 615 level. Gold smashed right throught that level. Now with Gold more than $US 50 higher, we are back above the TOP of the upchannel and two-thirds 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.