The Israeli invasion of Lebanon has now completed its third full week. It has now taken almost four times as long as did the "six day war" in 1967 and is now longer than the "Yom Kippur" war in 1973. There is no victor in sight, but the major victims are clearly the Lebanese people.
Over the first week of the war, the US "funds" concentrated on the Gold futures markets, knocking the Gold "price" down by almost $US 50.00 on the week in one of the most blatant manipulations seen in the past decade or more. Since then, Gold has recovered as concern grows over the length of the war and the inability to end it by military or diplomatic means. On top of that, concern is growing that if some sort of cease fire cannot be patched together soon, the events in Lebanon have an increasing potential for igniting the entire Middle East.
Couple this with a growing concern in the US about economic slowdown, and another outbreak of Central Bank rate rising this week with the Central Banks of Australia, the EU and Britain all tacking 0.25% onto their official rates of interest, and it is not surprising that Gold is slowly and surely "recovering" - notably in US Dollar terms of course.
But the recovery is in fits and starts. This week, the spot future closing price managed to exceed the $US 650 level on August 2 only to fall back to close the week at $US 644. There was an "interesting" development on August 4 when the spot future Gold price fell $US 0.90 in the face of a Silver price which was rising $US 0.39 (3.2%) and a $US Index (USDX) which fell nearly half a point to 84.38. That is the lowest close on the USDX in two months - since June 5 to be exact.
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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The relative percentage gains since March 2002 continue to say it all.
On the daily chart, the 10-day moving average remains below its 20-day counterpart this week but the Gold price remains comfortably above both. Next week will see both the FOMC meeting and a quarterly Treasury refunding auction, so there will be great incentive to keep the Gold price in check. Another week above both MAs on this chart, however, and the shorter-term average may cross back above its longer-term counterpart next week.
On the weekly chart, the 10-week and 20-week moving averages have converged for the first time this year. In fact, the 10 week MA crossed below the 20 week MA this week. Given that the big Gold correction from the $US 720 level began almost three months ago now and is still continuing, this was inevitable. As you can see, the Gold price remains above both MAs this week.
The point and figure chart shows Gold failing to regain its steepest uptrend line on the $US 2 x 3 point and figure chart, the line which shows the steepening of the bull market which began late last year. This chart could go either way, support being at Gold's recent lows just below the $US 620 level and resistance at Gold's mid July highs just below the $US 670 level.
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."
That was now nearly three months and a major correction ago. Last week, Gold turned UP again on the $US 5 x 3 chart when it closed above the $US 630 level on July 27. This week the chart added four more "Xs", reaching $US 650 plus on August 2 before settling back to close the week at $US 644