Last week, we reported on this page that we "may" have a major bottom in Gold because its price action had set up a major "double bottom" and therefore an equally major support point. Spot future Gold closed at $US 562 in mid June this year and almost exactly duplicated that close on October 5, just over two weeks ago.
This week, that possibility was further enhanced as the spot future Gold price climbed as high as $US 599 (closing basis) on October 19 and briefly poked its nose back above the $US 600 level in intraday trading in Asia the next day. Those levels were not held, however, and spot future Gold closed for the week this week down $US 6.00 on the day at $US 593.00.
Last week (October 9-13), Gold rose $US 16 in spite of a rising US Dollar. This week (October 16-20) Gold was up a much more subdued $US 4.20 despite the fact that the US Dollar gave up most of the rises it had made in the previous week. As the US mid-term elections draw closer, the "politicisation" of the markets grows more acute. And don't forget, the Fed's FOMC (Federal Open Market Committee) meets next Tuesday (October 24). No "inflation signals" please, we don't want to raise interest rates, especially so close to an election.
In this context, suffice it to say here as we said in the current issue of The Privateer (number 563 - published on October 15) that we think the overwhelmingly most likely "outcome" of this meeting is that the Fed will "stand pat".
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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That's right, the Dow breached the 12000 level for the first time ever this week even though it was only up about 40 points on the week.
On the daily chart, the shorter-term 10-day Moving Average (MA) has once again moved up again to meet its longer-term 20-day counterpart. Note that the last two times this happened on the chart, the shorter-term MA moved back down again. Note also that the time between these "waves" is shortening. However, we still await a situation where the 10-day MA is above the 20-day MA and the spot future price above both as the "buy signal" on this chart.
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. Note the much more subdued weekly trading range this week.
Two weeks ago, 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. That hasn't happened so far, although Gold did get as high as $US 599 on Thursday.
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.
In early September, we had the quickest transition from upturn to downturn in the bull market so far, taking place over two trading days. Last 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 a bit more than two 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.