Last week, Gold almost exactly duplicated the lows it set in June 2006 with a spot future close on October 5 of $US 562.00. This week, Gold has closed nearly $US 30 above that level with its spot future close of $US 588.80 (up $US 12.50 on the day) on October 13. We therefore have a "wide" double bottom on the chart at those mid June - early October lows.
That means that we may have a major bottom in Gold. We say "may" because the political nature of markets are even higher than they usually are at present with everything in the US now geared up for the crucual mid-term elections on November 7. Technically, it is safe to say that the low $US 560s in Gold, a level reached five months apart in June and October, represents a SOLID support area.
We have seen this in previous years since the bull got started back in 2001. In 2004, for example, Gold hit a high in April which it did not exceed until November, having dipped down below the level at which it started the year in the meantime.
The difference in 2006 is that the peak happened later in the year, May compared with June and the run up to that peak was MUCH bigger than any preceding one in the Gold bull thus far. Because the run up was bigger, so was the correction, about twice as big on a percentage basis as the 2004 example. But this year, Gold has NOT come back to the level at which it started before establishing a solid support point.
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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Two notable items in the data this week. First, the Dow has gone on to set new all time highs. Second, Gold rose $US 16.00 despite the fact that the $US as measured by the $US index (USDX) was up about half a point on the week.
On the daily chart, the shorter-term 10-day Moving Average (MA) has once again dipped below its longer-term 20-day counterpart after briefly poking above it last week. The Gold price however, has bounded back above both MAs with the $US 12.50 jump on Friday, October 13. The next step towards further confirming a "bottom" would be for the 10-day MA to cross back above its 20-day counterpart. The longer the Gold price stays above both, the sooner this will happen.
On the weekly chart, you can easily see the "wide" double bottom at the early June - early October lows just above the $US 560 level. Thus far, the Gold price remains below both (10 and 20 week) MAs and the shorter-term average remains below its longer-term counterpart.
Three weeks, we got the double bottom on the $US 2 x 3 point and figure chart at the $US 578 level. Last week, the WIDE double bottom at the $US 562 level was confirmed. The next step in firming up this chart is for the spot future Gold price to get back above the $US 600 level and hold there.
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.
Just over a month ago in early September, we had the quickest transition from upturn to downturn in the bull market so far, taking place over two trading days. This week, we got the quickest transition from downturn to upturn thus far in the bull market. Gold turned down on the chart on October 3 - hit its June 2006 lows on October 5, and has now turned up again on October 13.
We've got the upturn on this strategic chart, but the election is still three weeks away. What Gold has going for it at present is the grotesque "propping up exercise" being done on the stock markets, the ever weakening fundamentals for the US Dollar, and the simple fact that Gold has made major bull market runs in every November/January period since the start of the present bull market.