After a two week storm, a relative calm this week, with Gold up a "mere" nine bucks (US) on the week. That's after an $US 18.00 plus rise two weeks ago and a just under $US 24.00 plunge last week. Most of this has come amid a global financial headline deluge to the effect that "The Era Of 'Cheap Money' (low interest rates) Is Over!".
That is true, of course, and it does not come as a huge shock to most of the rest of the world since most major Central Banks have been industriously raising their official rates throughout the past year. This month alone, the Central Banks of Europe, Canada, New Zealand, Switzerland and more have raised their rates. The Central Bank which stands as the exception is, of course, the Fed, which has held official US rates frozen at 5.25 percent for almost a year now.
The next meeting of the Fed's "Open Market Committee" takes place on June 28-29 - almost a year to the day since they last raised US rates. Up until about six weeks ago, the betting on Wall Street was not whether but when the Fed would start lowering again. The fact that the rest of the world was steadily RAISING rates was held as being of no consequence whatsoever. Now, the hope of a rate cut has pretty well died in the US but that does NOT mean that any type of official rate RISE is expected.
And, as a crowning irony, Wall Street is hanging on with grim determination to the "mantra" that soaring US MARKET interest rates are "good" for the Dollar because they offer a higher "yield" to those who hold Dollar-denominated "assets". And in a pinch, they are all trying to convince themselves that nobody will ever sell Dollars or Dollar debt anyway. As Alan Greenspan's rhetorical question states: "Who would buy them?"
Who indeed?
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 percentage gain on the Dow has once again snuck just above the percentage loss on the $US index on the table this week.
Last week, the shorter-term (10 day) moving average (MA) was curving sharply upwards to once again cross above its longer-term (20 day) counterpart. Then there was the big selloff over the last two days of the week. This week, both moving averages are tracking downwards while the Gold price - up $US 9.00 on the week - comes up to meet them from below. The crossover point at present is about $US 3.00 - $US 3.50 above the $US 654.50 spot future Gold close on Friday, June 15.
On the weekly chart, the shorter-term 10 week MA has been above its longer-term 20 week counterpart since late last year. As you can see on the chart, the shorter-term MA is showing a steepening dip. This is a function of Gold being trapped in a trading range ever since late April. Despite its rise this week, the Gold price remains below both MAs on this chart.
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 last week turned the chart at the line and led to new recent lows. And this week we got the upturn.
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 on June 1 and turn up again. Last week, we had another DOWNTURN on the chart due to the $US 14.60 fall on June 8. With the spot Gold price back to the mid $US 650's this week, the chart has not moved. An upturn on this chart now requires a close of $US 665 or better.