Things are getting more dangerous for the "Gold managers". They are getting a bit too "predictable".
(The Gold Bull Market - October 27, 2006)
In sum, Gold went up the princely total of $US 0.90 this week, but within that almost calm weekly move lie some very big waves indeed. On November 8, the day after the elections, political "certainty" returned to the US for a day and the spot future Gold price promptly plummeted by $US 9.40 while the Dow actually managed to hit a new all time high.
The next day, Gold soared $US 18.50 to hit $US 636.80, its highest level since September 5. The catalyst was an announcement from China. At the beginning of this week, Chinese "foreign exchange" reserves finally topped the $US 1 TRILLION mark. On November 9, Chinese authorities were quoted as saying that they were actively seeking "alternatives" to diversify the makeup of this HUGE pile of foreign reserves.
The next day, the spot future Gold price was down $US 6.70 as "sober reflection" was said to have convinced most "analysts" that Gold could not possibly be one of the alternatives that the Chinese were considering. They had no choice but to be so convinced, of course, being petrified at the prospect of even a small part of that $US 1 TRILLION being directed at physical Gold buying.
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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For the first time in nearly two months, Gold's gain on this table is again (comfortably) above 100 percent.
On the daily chart, the shorter-term 10-day Moving Average (MA) moved above its longer-term 20-day counterpart two week with the price moving above both. That was the "buy signal". As you can see on the chart, the track since then has been perfect, with both 10 and 20-day moving averages following the price higher.
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. For the second week in a row, the Gold price has jumped will above both the 10 and 20 week moving averagest on the chart. The one caveat is that the shorter-term (10 week) moving average (MA) still remains below the longer-term 20 week MA. Final confirmation will come when this configuration is reversed. If Gold's ascent continues, that won't take long.
A month ago, the WIDE double bottom at the $US 562 level was confirmed on the point and figure chart. The danger of the second "bottom" in this formation is that it set up the possibility of a "head and shoulders" formation on the chart. This has been negated by Gold's big upmove back above the $US 630 level. As you can see, the Gold price has now distributed above the trendline (the dotted red line) drawn through the previous highs and then broken higher. This is a strong sign that the price is set to accelerate upwards.
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.
Two weeks ago, we got a downturn followed by an upturn in the same week on this chart. Last week, Gold broke above $US 600. This week the chart has gone still higher thanks to the $US 18.50 leap on November 9.
As we said here recently - 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.
Now that Gold is back well above $US 600, 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 (over $US 90) below the bull market highs it set back in May this year. If it does beat these highs, and Gold has set new bull market highs every December since the bull began, it has got a lot of rising to do in the next seven weeks.