A quiet week until Friday, and then a $US 10.30 spurt to $US 685.40, just below Gold's 2007 high set at the end of February. At any level of $US 690 or higher next week, Gold is poised for a run at its bull market high of $US 721.50 set nearly a year ago in May 2006.
Please note that it is now just over eleven months since Gold hit that May 2006 high. This is the longest period in the bull market so far during which Gold has failed to hit a new high in US Dollar terms. That, amongst other things, is the reason why the talk of a gold "bull market" has died down in recent months in the mainstream financial media.
However, the impetus under the Gold price has not gone away, it has simply intensified. And now, while the inflationary pressure from the US private sector in the form of the insatiable appetite for borrowing for consumer spending is abating, that same pressure in the form of government deficit spending is intensifying, and the US Dollar is reacting accordingly.
The only ingredient yet to enter the mix is growing concern amongst Americans themselves about the future of the US Dollar. The first signal that this might be changing was given in a Bloomberg article reporting on the $US 10 gold jump on April 13. Bloomberg said that this reflected a "demand for a dollar alternative." That's what pushed Gold from $US 35 to $US 850 in the 1970s.
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 had almost but not quite dipped to a 52 week low this week. This week, it has dipped to a two year low while the Gold price is on the verge of setting new 2007 highs.
As you can see on the daily bar chart, Gold has risen for the sixth week in a row this week with the rise accelerating on April 13. The shorter-term 10 day moving average (MA) is comfortably above its longer-term 20 day counterpart with the spot price now substantially above both.
On the weekly chart, the Gold price remains above both 10 and 20-week moving averages just as it has throughout 2007 to date. Essentially, this chart is climbing slowly but surely towards it 2007 high of $US 687 and has now all but reached it. Above that, there remains the May 2006 bull market high of $US 721. That's about 5.0 percent above Gold's present level.
On the point and figure chart, the $US 39 fall on the Gold price six weeks 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, especially with the $US 10 plus rise on Friday. Another reconfirmation of the uptrend line on the chart would require a spot future Gold close of $US 692.00 or higher. That is now very close.
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 in early March 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 three "Xs" on the upside, the last two being added when Gold closed above $US 685 level on April 13.
The chart is now at a decisive juncture. We have a potential "double top", which would be realised if Gold turned below the $US 690 level and retreated to close at $US 670 or lower. On the other hand, any Gold close of $US 700 or higher would re-confirm the current uptrend line and set the stage for a run at the bull market high set in May last year.