As this week wore on, it became apparent that the unprecedented moves announced by the Central Banks last week to cope with the credit freeze would indeed be sufficient to postpone the great reckoning in the global credit money system for the rest of this year. The only problem with that is that the rest of this year is of less than two weeks duration. Next year - 2008 - is almost upon us. What then?
Gold? Well. while gold stocks all over the world sold off big time along with all the rest as stock markets have faltered, Gold itself more or less plastered itself at or about the $US 800 level. That is, it did so until Friday (December 11) when the price once again shot up. This time by $US 12.40 to close the week at $US 811.60.
Last week Gold moved up strongly at the beginning of the week only to give it all back by week's end. This week, the opposite took place. Next week is, of course, the last trading week of 2007.
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.
As you can see, the 10 and 20-day moving averages (MA) on the daily bar chart are "flatlining" at or about the $US 800 level. For most of the week, the spot future Gold price traded in the same very narrow band. Then on December 21, the Gold price once again shot back above both MAs one more time.
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. This week, for the fifth week in a row, the low for the week saw the Gold price right on its shorter term (10 week) moving average. But unlike the previous two weeks, Gold bounced higher on December 21 to close for the week above both MAs.
On the point and figure chart, Gold remains in a fairly large distribution zone about $US 20 each side of the $US 800 level. As you can see, Gold closed this week right at the top of the zone but with, as yet, no upside breakout.
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, 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.
That's when the Gold price started getting "volatile" - in both directions. Last week, we had yet another downturn on the chart when the Gold price fell $US 20 on December 13-14. As we said here last week: "The BIG distribution zone is coming to a point. The price will have to break out of it soon. The only question is, in which direction?"
Well, the chart had another upturn on December 21 when Gold rose $US 12.40 to close above the $US 810 level. Right now, it is odds on that the break of the distribution zone will be to the UPSIDE. The intriquing question is will that happen next week or will it have to wait until 2008.