Things are getting more dangerous for the "Gold managers". They are getting a bit too "predictable". As you know, this was the week of the last FOMC meeting before the US mid term elections. As if it was scripted, on the Monday, October 23, the spot future Gold price dropped $US 13.30. Just in case that message didn't get through, the Dow had a "major" (in comparison with its recent movements) gain of 114 points. If only for a day, the main "inflation indicator" (the oil price having already been knocked on the head this month) fell hard. There was no discernible reason for Gold to fall $US 13.30 on October 23, it just did.
What it getting dangerous for the Gold managers is that by the end of the week and the decision to do nothing by the FOMC, Gold had gotten its Monday losses back and a little bit more. As you can see on the weekly bar chart, spot future Gold was up by $US 5.20 on the week and by $US 18.50 from the spot future close it set on the first trading day of the week.
Gold's impetus, especially after the FOMC announcement of unchanged official US rates on October 25, came from a sudden and quite sharp fall in the US Dollar. Over the last two trading days of the week, the US Dollar as measured by the $US index (USDX) fell nearly 1.0% to its lowest level since the start of the month.
The possible "major bottom in Gold" which we reported here three weeks ago and confirmed the following week is looking more and more likely.
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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Another week, a new all time high on the Dow. It has now exceeded the level it set in January 2000 by all of 3.13%. Compare that with Gold's gain since March 2002 - see above.
On the daily chart, the shorter-term 10-day Moving Average (MA) has once again moved above its longer-term 20-day counterpart. Here is what we said about this chart last week: "...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." That condition has been met this week, and will be further confirmed if spot future Gold regains and holds the $US 600 level next week.
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. This week, the Gold price has move just above the shorter-term (10 week) moving average. It remains below the longer-term 20 week MA, however, which also remains above its shorter-term counterpart. No "buy signals" on this chart yet.
Three weeks ago, the WIDE double bottom at the $US 562 level was confirmed on the point and figure char5. 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. Spot future Gold retreated from a $US 599 spot future close last week and has closed this week at $US 598.20. Close, but no $US 600 yet.
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.
It's not often we get a downturn followed by an upturn in the same week on this chart. In fact, it hadn't happened during the entire current $US Gold bull market. But it did happen this week. The chart turned down when Gold fell $US 13.30 to $US 579.70 on Monday, October 23 only to turn up again on Thursday, October 26 when Gold closed at $US 596.80.
When Gold starts "gyrating" on a $US 5 x 3 point and figure chart, you can figure that it is getting unusually "volatile". 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.
If and when Gold gets back into the $US 600 range, the likelihood increases that we are in for another repeat of that November/January run up this time. The difference is that Gold is still a long way ($US 120 plus) below the bull market highs it set back in May this year.