Three weeks ago on June 1, the headline of our main Gold This Week (GTW) commentary was: "April Up - May Down - June ????". Well, here with a week left in the month and the Jury is still out. Gold began June at $US 659.10. It closed on June 22 at $US 653.50 - down $US 1.00 on the week.
If Gold is going to perform as it usually does seasonally, it should start to move up sometime between the middle of next week and the end of the first week in July. Seasonally, Gold's worst times of year going back decades have been early-mid May to late June - early July and late September - early October to mid-late November. We think that an upturn, if Gold is going to conform to its seasonal norm, will probably be delayed until after next week for the simple reason that the Fed's FOMC meets next week (on June 28-29) to decide on US interest rates.
If they do what everybody expects them to do and stand pat one more time, this will be the eighth straight meeting over a period of exactly one year that they have done that. As we have stated before in The Privateer, the Fed has often held rates steady for a year or more after a series of lower rate decisions before RAISING them. For example, they held the Fed funds rate at a low of 3.00 percent from September 2002 until February 2004 and at a low of 1.00 percent from June 25, 2003 until June 30, 2004. But the present one year pause has not come after a series of lower rates, it has come after a two year series of rate rises, which raised the Fed Funds rate from that 1.00 percent level to the 5.25% it reached in June 2006. We cannot think of a previous period when the Fed waited so long before starting to LOWER their Fed Funds rate again.
And sure enough, disquiet is slowly increasing on Wall Street (not that anybody wants to actually talk about it). There is now seeping into future considerations there the possibility that the Fed might not be finished raising rates. The rest of the world's major Central Banks have, of course, accelerated their rate rises over the past year while the Fed has stood pat.
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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After managing to exceed it for most of the past month, the percentage rise on the Dow in this table is once again slipping further and futher behind the percentage FALL in the $US index over the same period.
Two weeks ago, 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. Since that happened, the Gold price has remained below both moving averages - until this week - and as you can see, the shorter-term MA is back below its longer-term counterpart on this chart. A close of $US 660 or higher is needed now to start to reverse the recent downtrend.
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. The Gold price remains below both MAs on this chart, and there is now a mere $US 1.00 difference between the 10 and 20-week moving averages. Unless the Gold price moves up sharply and soon, we will see the crossover.
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. Gold is now distributing below this line.
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. Then we had another DOWNTURN on the chart due to the $US 14.60 fall on June 8. That is where the chart remains, not having moved for the past two weeks. We're getting close to the end of June. We'll see what July brings.