The present acceleration in the upmove by the $US Gold price began on August 31 when both President Bush and Fed Chairman Bernanke gave speeches attempting to "reassure" global markets and the American people that they had the situation "under control" and that the credit freeze in the financial markets would not impact the so-called "real" economy.
Almost every single economic and financial statistic announced since then has contradicted them. As a result, the $US Gold price has risen by $US 35.30 (or 5.28 percent) in the five trading days since August 31. The latest "contradiction" to Bush and Bernanke's reassurances came on September 7 when the US Labor Department reported that the US economy had LOST 4000 jobs in August - the "street estimate" was for a gain of 100,000 jobs. The immediate reaction was a stock market sell-off, yet another stampede into US Treasuries and an 0.54 point drop in the USDX to a new bear market low of 79.91. The other result was a spot future Gold price which hit $US 710 in intraday trading before closing the week at $US 703.20, its highest close since May 12, 2006.
This week, the financial world got back into top gear as the northern summer ended with Labor Day in the US on September 3. And this week, $US Gold hit a new 2007 high.
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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Please note that the 79.91 close on the USDX is a new low in the $US bear market and the lowest close in the index for 15 years. It is also the second time in two months that the USDX has dipped below the VITAL 80.00 level. The first time was on July 24 when the index closed at 79.93. And further weakness from here in the USDX increases the potential for a sudden freefall of the US Dollar.
The $US 20 Gold price fall on August 16 on August 16 seems a very long time ago now. Gold has, of course, gotten all that back and quite a bit more too. This week was one of the best of the year so far with Gold up over $US 35. As you can see on the chart, the shorter-term (10 day) moving average MA has crossed above its longer-term (20 day) counterpart. This chart is entirely BULLISH.
On the weekly bar chart had been in a $US 645-690 trading range for the whole of 2007 - until this week. Now, the spot future price is above $US 700 for the first time since May 12, 2006. Gold's spot future close of $US 703.20 on September 7 was the fourth highest in its bull market to date. As with the daily chart, the shorter-term (10 week) MA has crossed back above its longer-term (20 week) counterpart.
The point and figure chart here shows the effect of Gold's inexorable rise since the $US 20 sell-off of August 16. As with the weekly bar chart, this chart has now sliced right through the top of the trading range which had confined the metal throughout the year to date. Note also that the new 2007 high on the chart has produced a new uptrend 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.
This chart is a superb example of the value of point and figure charts for showing LONG TERM trends in a market. Please note the simple fact that the $US 20 fall in the spot future Gold price on August 16 brought the chart right back to the uptrend line which stretches right back to the beginning of the bull market. Gold turned right there, and has gone straight up ever since.
So far this year, Gold closed above the $US 690 level twice - on April 16 and again on April 20. That gave us the double top on the chart.
Now, of course, the spot future price has broken above that $US 690 level and gone on to breach the $US 700 level with its close on September 7. At its present level, the chart is now two "Xs" above the double top set in April and three "Xs" below the bull market high ($US 720 on the chart) set in May last year.
What we are looking for on this chart are the following: