Gold has traded above the $US 800 level for a full week (six straight days actually) for the first time ever. That's how we led this off last week. It actually traded over the $US 800 level for sevem straight days. Despite the $US 27.00 fall on Monday, November 12, spot future Gold still closed for the day at $US 807.70. But then there was the $US 27.40 fall on Thursday, November 15.
As we again said last week: "Here we are, then, at the last "resistance point" for $US Gold. Not to put too fine a point on it, that resistance point well and truly kicked in this week. The proximity to the old all time high undoubtedly proved too tempting for a lot of Gold holders - especially PAPER Gold holders.
On top of that, there were no big bank CEOs resigning this week. the big New York banks managed to cobble together a $US 75 Billion "fund" to try keep the toxic sludge they are now reluctantly carrying on their books from having to be actually "priced" on the open market. Treasury Secretary Paulson was out defending the RESERVE CURRENCY STATUS of the US Dollar. And to top it all off, President Bush himself chose to wade into the fray and make it known that he favours a "strong Dollar" too.
Put it all together and we have a Gold correction. Now, the only question is how long it lasts.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 to stay on March 27, 2002:
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The USDX has now closed below the vital 80.00 level since September 7 and fell to the lowest point in its history - going all the way back to March 1973 - on November 2. But this week, the USDX actually rose, albeit not by very much. Gold prices have now remained above the previous ($US 721.50) bull market highs they set back in May 2006 since September 19. Last week, the spot future Gold price got within $US 12.50 or about 1.5 percent of $US 850. This week we got the downturn.
As you can see on the daily bar chart, the correction this week has seen the $US Gold price fall below both its 10 and 20-day moving averages. The shorter-term MA remains comfortably above its longer-term counterpart. Another week, or two at the most, below $US 800 will see this situation reversed.
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. Gold closed above the $US 800 level for the first time in this bull market on November 2. 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 9, 2007 was $US 77.60. This week, with the correction, the gap has been reduced to $US 22
The point and figure chart here shows a genuine correction after an almost exactly $US 100 upmove on Gold - without a single correction. We got the last correction with the $US 17.40 fall on October 2. We now await support showing up on the chart.
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 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. Gold then continued to rise on the chart, rising to and above the $US 800 level on November 2 and then reaching $US 83, only 3 "X"s below its 1980 all time high.
Now we have the downturn on the $US 5 x 3 chart. Because of the magnitude of the upmove, the first solid support point on the chart is at or about the $US 750 level. Of course, we could get an upturn at any point from present levels. The upturn, wherever it occurs, will give us our support point on the chart.