When one sees Gold (in US Dollar terms anyway) hitting new bull market highs and the US Dollar falling below the all time lows it set just three weeks ago on the $US index (USDX) in the week leading up to a G-7 Central Bankers and Finance Ministers meeting, one may be sure that things are worse than they are being made to appear. MUCH worse, in fact.
As you can see in the table below, the $US Gold price has broken above $US 760 this week, a VERY important number - more on that later. The USDX, on the proverbial other hand, has broken below the all time low of 77.62 it set on September 28. This week, it slumped to new all time lows on October 18 (77.52) and again on October 19 (77.37)
The G-7 has duly met. You will find links to the communique, and to a separate statement by US Treasuer Paulson, in our Gold This Week analysis. Suffice it to say here that they are being vigilant in practially all directions, but have said precisely nothing about any of the fundamental problems which are plaguing their financial systems.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 to stay on March 27, 2002:
|
The USDX has now closed below the vital 80.00 level since September 7 and fell to the lowest point in its history - going all the way back to March 1973 - on October 18. Gold prices have now remained above the previous ($US 721.50) bull market highs they set back in May 2006 since September 19 and reached antother bull market high this week. And the Dow has suffered a sudden relapse, picking October 19, the 20th anniversary of the 1987 crash, to tumble 2.6 percent - that's 367 points.
As you can see on the daily bar chart, the $US 17.40 Gold price fall on October 2 brought the price back below the shorter-term (10 day) moving average (MA). It didn't stay there for long. By the end of this week the price was back well above both moving averages. Gold has now closed above the $US 760 level for the first time in this bull market.
On the weekly bar chart Gold had been in a $US 645-690 trading range for the whole of 2007 until early September. The spot future Gold price closed above $US 700 for the first time since May 2006 on September 7 - the day the USDX dipped below 80.00 - and has remained there ever since. The shorter-term (10 week) MA remains solidly above its longer-term (20 week) counterpart on this chart with the price firmly above both. And this week, of course, Gold breached $US 760
The point and figure chart here shows starkly the almost exactly $US 100 upmove on Gold - without a single correction. We got the correction with the $US 17.40 fall on October 2. Once again, it has been almost straight up from there.
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:
|
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 rose almost $US 100 in a straight line with no corrections whatsoever.
Before the present run up, Gold's 2007 was just above the $US 690 level. It closed above that level twice, on April 16 and again on April 20. That gave us the double top on the chart.
The spot future price broke above that $US 690 level in early September went on to breach the $US 745 level with its close on October 1. And then, we had a downturn on the chart with Gold's close below $US 730 on October 2 and 3.
Last week, the chart turned up again as Gold climbed above the $US 750 level on October 11. This week, Gold closed above $US 760 on October 18 and 19. This is three clear "Xs" above the previous high and has produced a HUGE breakaway gap, by far the biggest in the whole history of the current bull market stretching back to 2002. On point and figure charts, a breakaway gap is usually (not always) the signal for an upside acceleration.
What this breakaway gap makes us CERTAIN of is that the next upleg in the post 2002 $US Gold bull market has been completely confirmed.