It's getting "volatile" out there. Last week Gold rose by a bit more than $US 18.00 over the final two days of the week. This week it fell by $US 23.80 over the last two days of the week. In each case, the background to these moves was the inexorable rise of US Treasury bond yields. The difference is that last week, the rise was merely a slight acceleration of the move that had been slowly building momentum for a month. This week - on June 7 to be exact, the day after the ECB announced their latest rate rise - US Treasury yields took their biggest one day jolt in years as yields SOARED.
Last week the ECB announced it had no plans to sell more Gold until September. That was not expected. This week the ECB announced an 0.25 percent rate rise to 4.00 percent, the highest level in six years. That WAS expected, and had been for months. In "normal" times, the rate rise would follow as a logical consequence of last week's announcement. But these are NOT "normal" times. Worldwide, there has been a marked increase in global fear of price inflation and of higher rates. So what did Gold do? It fell, suddenly, by nearly $US 24.00.
Of course, almost ALL these Gold price falls took place in trading on the futures markets in the US. On June 7, the PM fix in London was $US 0.95 lower than the PM fix on the previous day. In New York, the spot futures fell $US 9.20. On June 8, the PM fix in London was $US 4.85 lower than the US spot future price had been the previous day. In New York, the spot future price fell $US 14.60.
The US has the most to lose from fears of higher price inflation and interest rates coming true. So the new line from Wall Street is that higher US rates will be "good" for the US Dollar by offering foreign investors a better yield for purchasing US debt "assets".
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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Even though there was a slight rise on the $US index this week, a 3.00 percent fall on the Dow between June 5 - 7 has brought about a situation where the percentage loss of the US Dollar Index on this table is once again larger than the percentage rise of the Dow over the same period.
The daily chart shows a classic. Note that this week, the shorter-term (10 day) moving average (MA) was curving sharply upwards to once again cross above its longer-term (20 day) counterpart. Had it not been for the sudden Gold plunge over the last two days of the week, this would have happened. Instead, of course, the Gold price has bolted back below both MAs and below the floor of its recent trading range just above the $US 650 level.
On the weekly chart, the shorter-term 10 week MA has "capped" the Gold price action over the past two weeks. The difference is that last week the Gold price closede the week right on the MA while this week it has fallen away from ot over the last two days of the week to close back below both MAs. the sideways action which has been a feature of this chart ever since Gold hit $US 690 at the end of February continues.
The situation on the point and figure shows clearly how hard the Gold price has been pushed down since it hit $US 690 twice in April. The first and most obvious feature is that the Gold price has now fallen BELOW the uptrend line on the chart. Please note that this uptrend line does NOT stretch back to the beginning of the Gold bull market but it does stretch back to August/September last year. The sell-off this week has turned the chart at the line and led to new recent lows.
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.
Then, Gold closed above the $US 690 level twice - on April 16 and again on April 20.
Since then, Gold fell as low as $US 653.30 on May 24 only to reach the $US 670 level last Friday (June 1) and turn up again. This week, we have another DOWNTURN on the chart due to the $US 14.60 fall on June 8. This brings the chart one "X" (almost two Xs) below its previous low and right back to the uptrend line. We'll see what happens from here.