The most interesting thing about the "action" in the precious metals markets this week was that while the Gold "price" fell by $US 21.40 or 3.38%, the silver price actually rose - by $US 0.15 or 1.26%. This is VERY unusual. Once more, the US is running out of distractions
First, the mess in Iraq was swept off the news radars by Israel's attack on Lebanon. Then the Israel - Lebanon conflict was been swept off the news radars by the announcement in the UK on August 10 that a terrorist plot to blow up a number of airliners in flight from the UK to the US has been foiled. While all this has been going on, markets have been moving in ways that would seem absurd in any sane world. This week, with the cease fire in Lebanon more or less holding and the "planned terrorist attack" losing its sting simply because it never happened, we have this most unusual "shear" between the Gold and silver price.
With the latest scare, the London terrorist "sting" operation, having faded, the problem for the financial powers that be is where the next one is going to come from. As any student of "crisi times" can tell you, it is very easy to so saturate the public with consecutive distractions, especially scary ones, that they lose their effect.
For the second week in a row, the synopsis of the week is that almost every major market went in the opposite direction of the one it could have been expected to go, given the Fed's decision to leave US rates alone taken on August 8. The week ended with an only marginally lower US Dollar, a lower $US Gold and oil price, and rising US and world stock markets.
But nowadays, the bizarre is becoming the norrmal on world markets.
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.
Last week,the shorter-term 10-day Moving Average (MA) crossed back above its longer-term 20-day counterpart. That came on August 8, the day of the Fed's decision NOT to raise US interest rates. As we said here last week: "We'll see if we get ANOTHER crossover next week. As you can see, we did.
On the weekly chart, the 10-week and 20-week moving averages converged for the first time this year two weeks. ago As you can see on the chart, this week the shorter-term MA is almost $US 10 below its longer-term counterpart with the Gold price below both..
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. Price moves last week added a "double top" to this chart. Now, the chart has come down to the exact same point it reached before the upmove which led to the formation of the double top. Gold is at support right at present levels. We'll see if it holds.
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 three months and a major correction ago. The lastest upturn on this chart (from the $US 615 level) came three weeks ago on July 27. And now, as you can see on the chart, we have another downturn and are right back to that $US 615 level. We'll see if this level provides support or if Gold is going to continue downward to challenge the $US 600 level as it did in intraday trading in late July.