This was written at the end of the previous Gold Bull Market This Week:
"Looking at the bigger picture on the chart, we have a very well defined "reverse" head and shoulders formation which has now nearly completed its formation. As a rule, when such formations are broken out of, the direction is usually UP. The trigger to signal this is the $US 660 or higher Gold close already mentioned. Gold is slowly getting closer. We'll see what happens."
On February 1, the London PM Gold Fix was $US 660.20. On the same day, the Comex spot future contract traded as high as $US 661.50 intraday before closing at a new 2007 high of $US 557.40. The next day, February 2, the London PM Gold fix was $US 645.70 and the spot future Comex contract closed down $US 11.20 at $US 646.20.
Gold "bugs" are not the only ones who can read Gold charts. There are many reasons given for this sudden about face in precious metals prices (Silver was down $US 0.35 on February 2), but probably the most "interesting" one we've seen appeared in this story on CNNMoney.com - Gold tumbles on Iran news". The story states that US Defence Secretary Robert Gates had told reporters that "we are not planning a war with Iran". Really. These days, Wall Street is very easily "reassured", isn't it?
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:
|
Please note that the percentage gain on the Dow over the period shown in the table remains considerably LESS than the percentage loss in the US Dollar index over the same period. The Gold gain continues to dwarf both, of course.
Last week, the shorter-term (10 day) moving average (MA) crossed back above its longer-term (20 day) counterpart yet again on the daily chart. The Gold price rose considerably above both, until the abrupt turnaround on February 2. At its close for the week, the Gold price and the shorter-term moving average are at almost precisely the same level. that level, just above $US 646 - is the first support level for Gold.
On the weekly chart, the shorter-term (10 week) moving average has remained above its longer-term (20 week) counterpart for almost two months now, since the week ending on December 8, 2006. The spot future Gold price has closed above both moving averages for the past three weeks, and did so this week despite the February 2 fall. Please note that despite this fall, Gold managed a small rise on the week.
On the point and figure chart, Gold broke above the $US 640 ceiling which has been capping every rise since last August last week. When Gold closed above $US 652 on February 1, a new (short-term) uptrend was established. The downturn caused by the $US 11.20 fall on February 2 has (almost) brought Gold back to its previous high of $US 646. As is the case on the daily bar chart, Gold is back to its first support point.
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:
|
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.
2006 ended with an $US 18.90 rise on the week and another upturn on the chart. Over the first week of 2007, Gold slumped $US 19.30 on January 5 and the chart turned down. Three weeks ago, there was yet another upturn triggered by the $US 13.00 jump on January 12. Sinc then, the upturn has remained intact with Gold closing above the $US 645 level this week and moving back into the "black" for the year.
As you can see on the chart, the most recent action is a series of lower highs and lower lows forming a congested "distribution area". The first sign of genuine renewed strength on this chart would come if Gold broke that sequence. We had the first sign of it doing that as Gold topped the $US 645 level last week. This week, Gold reached the definitive "breakout" level of $US 660 in intraday trading on February 1, but did not CLOSE at or above that level.
Looking at the bigger picture on the chart, we have a very well defined "reverse" head and shoulders formation which has now nearly completed its formation. As a rule, when such formations are broken out of, the direction is usually UP. The trigger to signal this is a close of $US 660 or higher on Gold. We're still waiting for that.