Spot future Gold is down just over $US 10 this week, with the damage being done on April 24 and especially on April 26 when the spot future price fell $US 9.20 to $US 674.90. The sell-off came, as it almost always does, on the US markets. There was no particular reason, other than the pressure of the fact that while the US Treasury Secretary was talking about a "strong Dollar" being ongoing US policy, that same US Dollar was plunging to new post 2004 lows.
Indeed, the surreal quality of almost all world markets at present is getting totally out of hand. In the US the Dow cracked above the 13000 level for the first time ever this week. Not even the announcement by the US Commerce Department that US economic "growth" for the first quarter of 2007 was 1.3 percent affected Wall Street. The Dow was up on the day, albeit only slightly..
On one side, there is the financial sector of the economy where huge profits are still being made and where amounts of money in the $US TRILLIONS are now routine - the US government, for example, spends that much every four months. On the other side, there is the "main street" US economy where prices are spiralling upward, the borrowing capacity of consumers is all but exhausted and the US housing sector is imploding. Americans no longer believe their politicians, but they still seem to go along with their financial "controllers". The key to the breaking of the present financial system is the point at which this trust is lost
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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The Dow now has at least a small gain for the year to date, up five percent plus. But look at the table. The Dow's gain in percentage terms since March 2002 still lags behind the US Dollar index percentage loss over the same period.
As you can see on the daily bar chart, Gold has broken a string of seven straight weekly rises this week, coming off the 2007 highs it set last Friday (April 20. This week, the spot future price dipped below both 10 and 20-day moving averages by April 26, only to rebound on April 27. Thus far, the shorter-term 10 day moving average (MA) remains comfortably above its longer-term 20 day counterpart. To remain in that configuration, the Gold price is going to have to climb back above that 10-day moving average, presently at the $US 686.00 level.
On the weekly chart, the Gold price remains above both 10 and 20-week moving averages just as it has throughout 2007 to date. The pullback this week moved the price most of the way back to the shorter-term 10 week MA before the upturn on April 27.
On the point and figure chart, the $US 39 fall on the Gold price two months ago set up a new distribution area which pushed sideways towards the uptrend line on the chart. The chart then broke above this distribution zone and is forged higher. Last week, the uptrend line on the chart has been re-confirmed with Gold's $US 692.00 close on April 20. This week has come the downturn.
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. The January downturn found a bottom just above the $US 600 level. The March 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.
Last week, Gold closed above the $US 690 level twice - on April 16 and again on April 20.
This week, the chart turned down again when the spot future Gold price fell $US 9.20 to close at $US 674.90 on April 26. AS you can see, this has produced a "one above" top on the chart. This is not as "serious" as a double top would have been, but is nonetheless an indication that Gold might take longer than might have been anticipated to finally break through the bull market highs it set nearly a year ago on May 11, 2006. We'll see. The bull market is still, of course, perfectly intact.