In the immediate aftermath of the final separation of Gold and the US Dollar back on August 15, 1971, Mr Milton Friedman is said to have made a remark to the effect that the Gold "price" was doomed to drop to $US 10 or less now that the "support" of the US Dollar had been taken away from Gold. The official Gold "price" had, of course, been $US 35 per ounce for the previous 38 years.
Of course Mr Friedman had it backwards. In fact, the support of Gold had been taken away from the US Dollar. By August 1973, Gold had gone, not to $10, but to $100. By December 1974 it had gone to almost $200. And, of course, by January 1980 it took more than $US 800 to buy the same ounce of Gold that a Central Bank or a foreign government could have bought for $US 35 less than a decade earlier.
Spot future Gold closed above the $US 800 level four times in late January 1980. It has never done so again - until Friday, November 2, 2007 when the spot future Gold price rose $US 14.80 to close at a new bull market high of $US 808.50
In the two and a half months since the US Fed started cutting official US rates in mid August, the spot future Gold price has gained almost $US 160 or just a tad under 25 percent. To give you an idea of how badly the US Dollar has fared, over that same period the Aussie Dollar Gold price is up $A 52 or about 6.4 percent.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 to stay on March 27, 2002:
|
The USDX has now closed below the vital 80.00 level since September 7 and fell to the lowest point in its history - going all the way back to March 1973 - on November 2. Gold prices have now remained above the previous ($US 721.50) bull market highs they set back in May 2006 since September 19. This week, they breached the $US 800 level for the first time in almost twenty-eight years.
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 80.00. Gold has now closed above the $US 800 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 at 76.30, Gold has risen above the $US 800 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 November 2, 2007 was $US 67.00.
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, now breaching $US 800.
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 high 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, two weeks ago, 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. Since then, Gold has simply continued to rise on the chart, rising to and above the $US 800 level on November 2.
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. And at the rate is is now climbing, that point might not be too far away.