Ever since Gold rebounded from its June lows, the $US 610 has been the support point. That was the case throughout the northern Summer, at any rate. But since Labor Day, the situation has intensified. It was only two weeks ago, but on the first day of trading after the Labor Day weekend (Tuesday, September 5), spot future Gold actually bolted UP $US 14.10 to close at $US 640.20.
Then came a full week of George W Bush speechmaking, by the end of which Gold had fallen back to just above that $US 610 level. Then came the 9/11 "commemorative weekend". And then came the week just ended, during which that $US 610 level has been well and truly broken through.
Gold began this week by dropping $US 19.80 to free fall right through the $US 600 level, closing on September 11 at 591.60. By the end of the week, the spot future price was down to $US 577.50. On top of that, the Silver price fell over $US 2.00 between September 7 - 11 and the oil price has now fallen to its lowest level since late March.
The immediate catalyst has been the now unmistakeable and irrefutable evidence that the US housing bubble has well and truly popped. This has been made worse by recent warnings from both the IMF and the BIS about the danger of a "destablising" fall in the US Dollar. And hanging over everything else is the heating up of the US campaign for the November 7 mid term elections. A campaign which the Bush Administration cannot afford to lose.
To add a US financial meltdown to the foreign policy meltdown would make such a loss unavoidable. This week, all the stops have been pulled out to try to postpone any hint of such a meldown until AFTER the election on November 7.
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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Note that Gold's percentage gains are back under 100% on this table. The $US index hardly moved at all this week, rising 0.05 points on the $US index (USDX).
On the daily chart, the move up to the $US 640 level last week pushed the short-term 10 day moving average (MA) back above its longer-term 20 day counterpart. That was the signal for the dive this week. The shorter-term MA has dived straight back below its longer-term counterpart this week, the major damage being done with the "gap down" $US 19.80 fall on September 11.
On the weekly chart, the 10-week MA crossed below the 20-week MA converged for the first time this year in mid August. As you can see, Gold basically went sideways for two months. Two weeks ago, we said: "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." We had the break to the upside on September 5 when Gold bolted to $US 640. This week we have the break to the downside with Gold cascading back below the $US 600 level for the first time since June.
Last week, we had a potential double bottom on the $US 2 x 3 point and figure chart. That has been shatterred this week as Gold hammered down below $US 600 and then $US 580 by the end of the week. The obvious support point on the chart is now the June lows around the $US 562 - 654 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."
Last week, we had the quickest transition from upturn to downturn in the bull market so far. The $US 640 close on Tuesday, September 5 turned the chart up. That was followed two days later by another downturn as Gold slipped back below the $US 620 level. As you can see on the chart, that slide has accelerated this week. The major support point in the $US 5 x 3 Gold chart is now at the June lows around the $US 565 level. Below that, there is the major uptrend line on the chart which is presently around the $US 540 level.