The $US Gold price has not reached its bull market high set back in May 2006, yet, but it got still closer this week. The spot future price spent the entire week above $US 700, rising as high as $US 714.40 on a closing basis on September 14. The USDX (US Dollar index) in contrast spent the whole week below the 80.00 level. This has only happened once before in its history.
As you know, the big rises on the Gold price stopped mid-week this week as a concerted effort was made to reassure the global public (and commercial bankers everywhere) that the prospects for a "thaw" in the global interbank lending freeze were improving. The US Dollar recovered slightly from its lows set on September 12, Gold backed off slightly from its highs set on September 11. US and world stock markets rose.
But on Friday, September 14, the most ominous event to date in the financial crisis occurred. We refer to the RUN on the Northern Rock bank in the UK (see Gold This Week). The repercussions of that have yet to take hold, although a $US 10 rise in the Gold price in London on the day was pared back in later trading in New York.
Now, all eyes everywhere are fixed on the US Fed for the FOMC meeting to take place next Tuesday, September 18.
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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This week, the USDX closed as low as 79.34 and spen that the 79.91 and spent the entire week below the 80.00 level for the first time since 2002. On July 24, the USDX closed at 79.93 but rebounded above 80.00 the next day. This time, the USDX has been below 80.00 for more than a week. The longer this lasts, the higher the potential for a sudden and extreme fall in the USDX.
Last week was one of the best of the year so far with Gold up over $US 35. It was also the week that the shorter-term (10 day) moving average MA crossed back above its longer-term (20 day) counterpart. This week, the rise has continued. This chart is entirely BULLISH.
On the weekly bar chart Gold had been in a $US 645-690 trading range for the whole of 2007 until last week. The spot future Gold price closed above $US 700 for the first time since May 2006 on September 7 and has remained there ever since. 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 $US 710 level with its close on September 11. At its present level, the chart is now four "Xs" above the double top set in April and two "Xs" below the bull market high ($US 720 on the chart) set in May last year.
What we were looking for on this chart last week were the following: