Last week, the Gold "price" fell by $US 21.40 or 3.38%, while the silver price actually rose - by $US 0.15 or 1.26%. This week (see the weekly chart), Gold has regained just under half of those losses while the silver price continues to rise. The Gold price rise actually came on Monday, August 21 when the spot future price rose $US 13.60. Since then, the price has more or less been "running on the spot".
The month so far has been one of steadily diminishing 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. A (so far very shaky) cease fire has been imposed by the UN on Israel and Lebanon. the UK terrorist scare has died down almost as fast as it sprang up and the veracity of same is being thrown into a more and more dubious light. For the past week, the markets have sleepwalked as the northern hemisphere gets ready for the last week of the "Summer doldrums".
This weekend, the world's Central Bankers have gathered for their annual gab fest in Jackson Hole, Wyoming. Meanwile, inside the US, as the evidence that the housing bubble has burst becomes impossible to contradict, the hope grows that the Fed's "pause" at the last FOMC meeting is going to prove permanent. This week, the suggestions that the Fed might be forced to LOWER rates again, and in the near future too, began to proliferate.
This is, in itself, a dead giveaway. So is a recent report from "economists" at the Chicago Fed that the US Central Bank had anything to do with the US housing boom in the first place. This is right up there with the claim that Saddam's "weapons of mass distruction" made it necessary to invade Iraq in 2003. It is a transparent and absurd lie. Only officials that are VERY worried about what they can see coming at them make such preposterous statements.
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.
Two weeks ago,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. Last week, it crossed back below it again. This week the shorter-term MA is almost $US 10 below its longer-term counterpart with the Gold price having almost precisely duplicated it ever since the $US 13.60 upmove on August 21.
On the weekly chart, the 10-week and 20-week moving averages (MA) converged for the first time this year two weeks. Now, the shorter term MA has crossed blow its longer-term counterpart - for the first time this year. Clearly, with the weekly "range" being more and more compressed, the price is going to have to break one way or the other in the near future.
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. Since then, we have seen a double top formed on the chart followed by a wider double bottom created by the upmove this week. Gold is now in a tight trading range on this chart too.
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 four weeks ago on July 27. Then, as you can see on the chart, we have had another downturn and are right back to that $US 615 level. We'll see if this level provides support. Another upturn on this chart requires a spot future Gold close of $US 630.00 or higher, that's $US 8.00 above the close on August 25.