A very strong week for Gold to end 2006. With no trading on Monday and a shortened trading day on Friday - the spot future Gold price rose $US 18.90 or 3.05 percent this week to end the year at $US 638.00. On the year, that's a rise of $US 119.10 or 22.95 percent. This is the second best year in Gold's bull market which began in 2002, beaten only by the 24.80 percent rise which took place in that year.
As we enter 2007, the main question is over the fate of the US Dollar. Under Mr Bernanke, the Fed last raised the Fed Funds rate at the end of June 2006 and have sat on their hands since then. The betting on Wall Street is that they will start LOWERING US rates again in 2007, maybe not as early in 2007 as had been hoped a few weeks ago, but early enough if any renewed weakness is felt on the stock markets.
The Fed has stopped raising rates, but the rest of the world has not. The longer this continues, the more pressure will fall on the US Dollar, a fact studiously ignored on Wall Street, at the Fed, and at the White House. Nor are any of those centres of world "power" paying any heed to what might happen to the US Dollar if the Fed actually started CUTTING rates next year.
As we stated in the Late December issue of The Privateer (Number 568 - Published on December 24), 2007 is shaping up as the year when the "powers that be" in the US find to their horror that they can no more continue flouting economic law with impunity than they flouted international law with their disastrous adventures in Iraq and Afghanistan.
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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Please note that the $US Gold price was not "helped" by a lower US Dollar this week. The $US index (USDX) fell a mere 0.19 points on the week.
On the daily chart, Gold has back comfortably above both its 10 and 20-day moving averages once again this week. The shorter-term 10-week moving average remains below its longer-term 20-week counterpart, but further strength on the Gold price early in the new year will see that position reversed very quickly.
On the weekly chart, after retreating back to just above its 20-week moving average last week, the Gold price has bounced back well above both moving averages. Two weeks ago, the shorter-term 10-week moving average crossed back below its longer-term 20-week counterpart - for the first time since late July. With the Gold price now above both moving averages, it's all systems "go" on this chart.
On the point and figure chart, the week's activity has seen Gold regain most of the losses it suffered earlier in December. The resistance point in this chart is the recent high at the $US 646 level. The Gold price will signal a "breakout" if it closes at $US 652 or higher in coming days or weeks without an intervening downturn on the chart.
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 three weeks as Gold fell $US 18.60 on the week to close at $US 626.10 on December 8. Two weeks ago, the downturn was taken to the $US 615 level.
With the $US 18.90 rise this week, the chart has turned up again with Gold closing above the $US 635 level on December 28 and 29. On this chart, the resistance level is at the top of the previous upmove at $US 645. Any Gold close of $US 660 or higher would be VERY bullish.