The last week of 2006 was, to quote our previous report, "A very strong week for Gold". The first week of 2007 has reversed that with a vengeance. As usual, the big falls this week started the moment the US markets swung back into action on January 3.
The big sell-off came on Friday on the back of a US December employment report which signalled to Wall Street that the Fed might not be quite so eager to lower US rates as had been thought. That led to an instant Gold (and Silver) sell off and an equally instant turnaround for the US Dollar which had been weakening in early trading
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.
How deliciously ironic. This was the week when the shorter-term (10 day) moving average crossed back above its longer-term (20 day) counterpart on the daily chart. This is, of course, a "buy" signal as a rule. But this week, the spot future Gold price has plummeted back below both moving averages. Expect yet another moving average crossover very soon.
On the weekly chart, the Gold price bounced back well above both moving averages three weeks ago. week. Last week ,the price broke back above both moving averages. Now, while the shorter-term MA remains comfortably above its longer-term counterpart, the Gold price has dipped back well below both of them.
On the point and figure chart, the week's activity has seen Gold abruptly turn down from its levels at the end of December and fall slightly below the bottom of its previous downturn. As you can see, the chart has resumed following the red dotted downtrend line downwards as it has been doing ever since it broke back above the $US 600 level in late October.
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 a little over a month ago, we got a downturn followed by an upturn in the same week on this chart.
Last week, 2006 ended with an $US 18.90 rise on the week and another upturn on the chart. And as you know, on January 2, the Gold price was pressing against the top of its recent $US 640-645 resistance area.
That all changed, fast, once US markets ground back into action on January 3. The big $US 19.30 Gold fall on January 5 has produced yet another downturn on the $US 5 x 3 chart.