Thus far, Gold has not yet revisited its June 2006 lows in the low $US 560s. Indeed, technical evidence is beginning to emerge on the Gold price charts that the metal has found support. We now have a "double bottom" on the $US 1 x 3 and $US 2 x 3 (see below) point and figure charts and we have similar technical formations on the Gold charts in other major currencies.
Gold dipped to close below the $US 580 level last Friday (September 15) and again this week on September 19, the day before the FOMC meeting. Both times it rebounded, despite commodity prices which are still falling hard. On September 22, for example, spot future Gold rose $US 7.10 despite an oil price which fell more than $US 1.00 on the day and is once again on the verge of dipping below the $US 60 level to new 2006 lows.
With six weeks still remaining before the US mid term elections, it is much to early to say that the $US Gold price has found a "bottom" in this correction. At a bare minimum, the Gold price is going to have to get back above the $US 600 level and preferably below the $US 610 level, the support point for Gold before the precipitous sell off last week (September 8 - 12)
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 big mover this week was the $US index (USDX) which fell more than a full point.
On the daily chart, the move up to the $US 640 level two weeks ago pushed the short-term 10 day moving average (MA) back above its longer-term 20 day counterpart. That was the signal for the dive last week. The shorter-term MA has dived straight back below its longer-term counterpart. You can see the support base being constructed around the $US 580 level this week, and the poke up to $US 590 which pushed the price back above the 10-day MA.
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. Three 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, and then the dive below $US 600 last week.
Two weeks ago, we had a potential double bottom on the $US 2 x 3 point and figure chart which was shattered as Gold hammered down below $US 600 and then $US 580 by the end of last week. This week, the double bottom did occur - at the $US 578 level. This is the first solid sign of support in the current correction.
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."
Two weeks ago, 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. More recently, Gold has dipped below the $US 580 level twice but rebounded each time.
The big number to watch for on this chart is $US 595 - the price required to cause another upturn on the chart. Unless and until we get that, the major support point remains at the June 2006 lows just above the $US 560 level. Should we get an upturn, the first resistance point on the chart is at $US 615 and to break the recent cycle of lower highs and lower lows, Gold is going to have to get all the way back to the $US 640 it reached three weeks ago.