It's getting "volatile alright, not surprising with Gold challenging its all time highs in $US terms. For the third week in a row, we have had a weekly movement of nearly $US 50 - this time downwards, as the $US Gold price keeps on getting hauled back from the brink of charting new territory in $US terms.
The difference this week big falls of two weeks ago is that this time, the US Dollar as measured by the $US index (USDX) has suddenly turned upward too. Over the last two days of the week, the USDX has risen more than a full point, going from 75.10 to 76.17.
But all this pales into comparative insignificance when compared to the freeze up in the global market for commercial debt paper of almost any description and the increasingly desperate measures now being trumpeted by the Central Banks to try to "cope" with this. When all the remaining "rules" designed to maintain a patina of "fiscal probity" are being thrown to the four winds, it is any wonder that Gold, Silver, Oil, Commodities, Stock Markets et all are gyrating madly?
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 to stay on March 27, 2002:
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The USDX has now closed below the vital 80.00 level since September 7 and fell to the lowest point in its history - going all the way back to March 1973 - on November 22. Gold prices have now remained above the previous ($US 721.50) bull market highs they set back in May 2006 since September 19. Gold has had its second nearly $US 50 reversal in the last two weeks this week while the USDX rose more than a point on November 29-30.
As you can see on the daily bar chart, for the second time in the past three weeks Gold has fallen well below its 10 and 20-day moving averages. Last week, the shorter-term average fell below its longer-term counterpart despite a big upmove on the Gold price. This week, the situation remains the same as Gold approaches the lows it set back on November 19.
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. Since then, there have been two attempts to challenge the old $US 850 high, both of them falling short and correcting..
Please note also that the Gold price hit its longer-term (20 week) moving average almost precisely twice in the past three weeks.
The point and figure chart here shows a genuine correction after an almost exactly $US 100 upmove on Gold - without a single correction. Below its November 19 low at $US 778, support lies in the $US 760s and, below that, in the $US 740s.
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, just over a month 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 835, only 3 "X"s below its 1980 all time high.
Two weeks we got the downturn on the $US 5 x 3 chart. Last week we got the upturn. This week we have another downturn. Gold is now in a large "V" or trading range on the chart and is now threatening to break below it. To set the chart in a genuine correction, Gold is going to have to continue to fall from present levels to $US 765 or less. Even if that does happen, the bull market is perfectly intact - see the uptrend line.