The first full week of the new US government with its lame duck Administration and Democrat-dominated Congress has been a "steady as you go" one for the financial system so far. The US stock markets continue to inch up. Treasury yields continue to fall. The US Dollar is running on the spot at or about the 85 level on the $US index (USDX). The oil price has plummeted again. And Gold (and the other precious metals) have slowly and softly subsided this week.
As you can see on the weekly chart, the spot future Gold price fall by $US 7.60 or about 1.2 percent this week against a US Dollar which managed a rise of about 0.50 percent on the USDX. On the US stock markets, the Dow continues to hit all time highs while the S&P 500 climbed above the 1400 level for the first time for six years - since November 2000 - on November 17, 2006.
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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After two months below that level, Gold's gain on this table has spent the last two weeks comfortably above 100 percent.
On the daily chart, the slow sell-off this week has seen the spot future closing price of Gold once again dip below the shorter-term 10 day moving average. The shorter-term average, however, remains comfortably above its longer-term 20-day counterpart. Please note that Gold got as low as $US 614 in intra-day trading on November 17 - touching the longer-term MA, before it recovered in late trading to end the day with a slight gain at $US 622.50
On the weekly chart, the shorter-term 10-week Moving Average (MA) remains below its longer-term 20-week counterpart with the Gold price still above both. This chart is still inconclusive. We await the crossover - shorter term MA moving above longer-term MA - for a definitive signal on this chart.
In early October, 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 $US 600 tothe $US 636 level last week. 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. It has now retreated to the same level as the last upmove took off from. We'll see what happens.
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.
Three weeks ago, we got a downturn followed by an upturn in the same week on this chart. Last week, Gold broke above $US 600. Last week the chart breached the $US 635 level 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.
This week, Gold traded below the $US 620 level (which would have turned this chart down again) on three of the five trading days of the week, but never closed below $US 620. That is the level which would turn the chart down. We'll see if we get another such "gyration" on the chart next week.