Another Friday "hit" by the "funds" in New York after all the other markets were safely closed for the weekend. Gold down $US 11.60 to $US 615 - its lowest level since November 1. Silver down a whopping $US 0.96 to 12.82. Once again, we have "reassuring" economic statistics from the government. Once again the funds bail out. They don't feel comfortable in commodities anyway, especially in commodities which pose a potential threat to the US Dollar.
Last week, the major Gold fall - down $US 11.80 to $US 630.50 - came on December 6, the day before the European Central Bank did what everyone expected them to do and raised their controlling interest rates by 0.25 percent to 3.50 percent. Then there was another very abrupt fall which took place (you guessed it) in late trading on Friday, December 8 after all the other markets were closed
Last week, the US Secretary of the Treasury, Mr Paulson, was quoted as saying that he believed that a "strong" US Dollar was in the "national interest". This week, Mr Paulson and Mr Bernanke are in China to talk with their Chinese counterparts about the US Dollar (amongst other things).
Last week, the US Dollar index (USDX) which was trading at a new 52-week low of 82.38 shortly before Mr Paulsen cleared his throat to speak, ended the day on December 8 up nearly a whole point from that intraday low at 83.30, its highest level since November 27. This week, the USXD has continued to climb, reaching 84.07 by the end of the week on reports of low inflation (the November CPI was flat).
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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A grandiose rescue act on the US Dollar. The Fed left rates unchanged as everyone expected and Mr Bernanke and Mr Paulson did not run into any heavy weather (none reported anyway) during their sojourn in China.
On the daily chart, Gold's $US 18.60 fall this week pushed the price back below both 10 and 20-day moving averages. This week, the shorter-term (10-day) moving average (MA)has crossed back below its 20-day counterpart. The daily chart was signalling all systems go last week. Now, the price has fallen below the averages again and the averages have crossed.
As you can see on the weekly chart, the Gold price has come back this week to be hovering midway between the two moving averages. Ironically this was the week when the shorter-term 10-week moving average crossed back above its longer-term 20-week counterpart - for the first time since late July. Now, we have all three - short and long term moving average and Gold price - within $US 2.00 of each other.
On the point and figure chart we have a simple downturn which has now dipped just below support. The Gold price on this chart remains comfortably above the downtrend line drawn through the May and August 2006 highs. The first step is, of course, to find the point at which Gold turns up again on the chart. From present levels, that would require a spot future close of $US 622 or higher.
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.
A month ago, we got a downturn followed by an upturn in the same week on this chart.
The chart turned down again last week as Gold fell $US 18.60 on the week to close at $US 626.10 on December 8. This week, nothing at all happened until the "sudden" $US 11.60 fall on December 15 putting another 3 "X"s on this downmove on the chart. We are watching now of course for the point where the chart turns up again.
There are support points on the chart all the way from the present level to the uptrend line - the green line - presently at or about the $US 580 level.