Once again, world stock markets have had a bad week this week after the false calm of the previous week. Once again Gold was sold off, but to a far lesser extent than it was two weeks ago when the markets fell precipitously off their highs. As the foreboding in the paper markets increases, Gold is proving more resilient to the panic stampede to "safety" which was the main feature of the big Gold drops of two weeks ago.
In fact, in spite of the mid week market slump this week, Gold actually gained on the week.
The sell off two weeks ago was bursting of global investors' complacency. The usual litany from US financial "officials", notably Treasury Secretary Paulson, was immediately offered to the effect that the "economy" is in fine shape. It didn't take long to bring that statement into question this week, and this time, the major victim besides world stock markets has been the US Dollar which accelerated downwards at week's end.
Last week, Europe raised rates. Next week, the Fed meets with the almost certain outcome that the Fed will stand pat one more time. The pressure on the Dollar, and on the debt-based financial markets, can only continue to grow.
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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Last week, the $US index rose just under 0.50 points. This week, it fell 0.98 points.
On the daily bar chart, the Gold price dipped substantially below both 10 and 20-day moving averages (MA) two weeks ago. Now, as you can see on the chart, the price has once more risen above the shorter-term 10 day MA which has now begun to turn up again. The trigger for another Gold "rallY" will come when the Gold price gets back above the 20-day MA and, even more, when the shorter-term MA once again crosses above its longer-term counterpart.
On the weekly chart, the situation is much more clear cut. This week, the Gold price has once again risen above both 10 and 20-week moving averages. The shorter-term average remains above its longer term counterpart, as has been the case since late last year.
On the point and figure chart, the $US 39 fall on the Gold price two weeks ago the chart a little more than halfway back to the uptrend line established when Gold came off its 2007 lows in late January. As you can see, the trading since then has pushed the chart sideways towards that uptrend line, which now provides powerful support.
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.
The big Gold price falls two weeks ago brought about the first downturn on this chart since the beginning of January. That one found a bottom just above the $US 600 level. This downturn has reversed itself at the $US 640 level. The spot future Gold close of $US 655.50 on March 8 has turned the $US 5 x 3 chart up again.
This week, Gold closed as low as $US 642.50 on March 15 but has risen quickly from there over the rest of the week.
Two weeks ago, we had the knee jerk reaction of a flight into government debt paper. Last week, the US Treausury market suffered its biggest one day sell off so far this year on March 9. This week, it was the turn of the US Dollar, with the $US index USDX) falling almost a full point (0.98) over the week. On the $US 5 x 3 Gold chart, support is at the $US 640 level and resistance at $US 685.