"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."
The Gold Bull Market This Week - October 19, 2007
How much worse? We got a glimpse of that this week. Merrill Lynch announced a $US 2.3 Billion loss for the third-quarter and wrote off almost $US 8 Billion of subprime paper and other forms of debt instrument. Oil hit an all time high of almost $US 92. The USDX ($US index) slumped below the 77.00 level for the first time ever. California median house prices fell by more than $US 50,000 in September. And Gold was up just over $US 28 in the four trading days between October 23-26 with $US 16.60 of that rise coming on October 26 alone.
Gold is, of course, at a bull market high in US Dollar terms. It has now only one resistance point left in the entire history of it US Dollar "price" since that was capped at $US 35 per ounce. That price is, of course, the $US 850 close ($US 878 intraday high) of January 21, 1980 - the highest $US Gold price ever.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 to stay on March 27, 2002:
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The USDX has now closed below the vital 80.00 level since September 7 and fell to the lowest point in its history - going all the way back to March 1973 - on October 26. Gold prices have now remained above the previous ($US 721.50) bull market highs they set back in May 2006 since September 19 and reached antother bull market high this week.
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). From there, Gold has gone straight up almost $US 55.00. Gold has now closed above the $US 780 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. Now, with the USDX below 77.00, Gold has risen above the $US 780 level. On the week ending May 12, 2006, just before the big May/June correction of that year, the Gold price close ended the week $US 101 above its ten-week moving average. The gap on October 26, 2007 was $US 56.00.
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. Since then, with a couple of small "consolidations, Gold has continued to rise substantially.
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 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.
Then, last week, Gold closed above $US 760 on October 18 and 19. This is three clear "Xs" above the previous high and produced a HUGE breakaway gap, by far the biggest in the whole history of the current bull market stretching back to 2002. This week, of course, Gold has simply continued to rise on the chart.
What the breakaway gap makes us CERTAIN of is that the next upleg in the post 2002 $US Gold bull market has been completely confirmed. The US Dollar is at all time lows. Gold in US Dollar terms is not - yet - at all time highs. It will be at some point during this new Gold bull market upleg.