This week, global markets have gone into a state of near "limbo". The reason is simple. As predictions of a US attack on Iran proliferate from all over the world, the world can do nothing but watch and wait. Precious metals have gone quiet, stock markets have gone quiet, bond markets have gone quiet, currency markets have gone quiet. The only market which has not gone quiet is the oil market where the spot future price of a barrel of oil is up $US 3.60 or 5.8 percent this week and has risen by $US 9.28 or 16.4 percent in the less than two weeks since March 19.
As you probably know, the Saudi Arabians have now called the US presence in Iraq an "illegal occupation". At Ridayh, 22 Arab nations have met and sent out a peace proposal to Israel which Prime Minister Ohlmert has called "revolutionary". Inside US politics, the Speaker of the House and third in line to the Presidency, Democrat Nancy Pelosi, has announced that she is going to visit Syria. The world is doing its best to dissuade the Bush Administration from attacking Iran, but it knows that if Mr Bush et al are determined to do so, they can't be stopped.
This is what has led to the eerie calm (except for oil prices as mentioned earlier) which has settled over financial markets worldwide this week. We, like you, can only wait and hope that Mr Bush is not crazy enough to take the fantastically unjustified and dangerous step of attacking Iran. To do so would turn what is already a deadly quagmire in Iraq (and Afghanistan) into a conflagration potentially encompassing the entire Middle East. It would also put his troops on the ground in Iraq and (to a lesser extent) Afghanistan in an even more untenable situation to the one they already face.
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:
|
The $US index has lost ground this week and is now challenging the 2007 lows it set just before the March 21 FOMC meeting.
As you can see on the daily bar chart, the shorter-term (10 day) moving average (MA) has crossed back above its longer-term counterpart this week. The Gold price has risen this week (despite its $US 5.30 fall on March 29) and is now back above both moving averages. We have the "trigger" on this chart, but to really assert itself the Gold price is going to have to get back above its recent highs around $US 670.
On the weekly chart, the situation is much more clear cut. The Gold price remains 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. Essentially, there is no change on the weekly chart this week.
On the point and figure chart, the $US 39 fall on the Gold price a month ago set up a new distribution area which pushed sideways towards the uptrend line on the chart. Now, the chart has broken above this distribution zone and is forging higher, albeit slowly. This reconfirms the uptrend line 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:
|
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 a month 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 reversed itself at the $US 640 level. The spot future Gold close of $US 655.50 on March 8 turned the $US 5 x 3 chart up again.
This week, the chart added another "X" on the upside when Gold closed at or above the $US 665 level on March 28.
A month ago, we had the knee jerk reaction of a flight into government debt paper. Three weeks ago, the US Treasury market suffered its biggest one day sell off so far this year on March 9. Last week, it was the turn of the US Dollar, with the $US index USDX) falling to new 2007 lows mid week. And now, everything is "on hold" waiting to see if the US attacks Iran.