The $US 14.00 fall in the spot future Gold price on February 1 was actually the third abrupt Gold fall over the past two weeks. There was the abrupt $US 20.60 fall on January 16 as "margin calls" were sent out on stock positions all over the world. There was also Gold's swoon all the way down to the $US 850 level in intraday Asian/European trading as the "margin calls" grew frantic on January 21/22. The US Gold market was closed for at the time for the Martin Luther King holiday. Even with all that "volatility", Gold still managed a 10.1 percent gain on the US futures markets in January, its best one day gain in percentage terms in nearly two years.
Much more to the point, though, Gold has spent the past seven trading days closing ABOVE the $US 900 level at all time highs very comfortably above the old spot future closing high of $US 873 set in January 1980. And Gold's fall for the week this week was a mere $US 2.00 despite the fall on February 1.
And, of course, this was the week when the Fed cut official US rates for the second time in eight days, slashing the Fed Funds rate from the 4.25 percent it had been on January 21 all the way down to 3.00 percent. These rate cuts have not been reflected on the $US - yet. They will be.
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 now spent three weeks well above its previous spot high of $US 850 and the past seven trading days closing above the $US 900 level.
Spot future Gold closed below the $US 800 level as recently as December 20. Now, the spot future close has climbed as high s $US 927 before the $US 14 pullback on February 1. The 10 and 20-day moving averages (MA) on the daily bar chart are climbing with the shorter-term average back above the longer-term one. As you can see, Gold came right back to touch its shorter-term (10 day) MA with its fall on February 1.
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. The first spot future close above the $US 900 level came on January 14. As of the close on January 28, the spot future Gold close was about $US 76 above its shorter-term (10 week) moving average on this chart. The spread narrowed to $US 60 with the close on February 1.
On the point and figure chart, Gold broke above its fairly large distribution zone about $US 20 each side of the $US 800 level just before Christmas. The close above $US 842 on December 28 established a new and much steeper uptrend line on the chart. Gold has gone on to reach new all time highs this week on the chart. The next step is to consolidate above the $US 900 level. And, of course, we now have the downturn on this 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, 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. A month ago, we had yet another downturn on the chart when the Gold price fell $US 20 on December 13-14. And as we said here shortly before Christmas: "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?"
Now, that large distribution zone has definitely been broken - TO THE UPSIDE. Three weeks ago. EVERYTHING was broken to the upside with Gold reaching new all time highs in $US terms. And now, Gold has distributed ABOVE its former all time high and gone on to set yet new highs above $US 900. When Gold leaped $US 22.70 on January 28 to close at $US 927.10, it established a LARGE breakaway gap on the chart. Now, with the $US 14 fall on February 1, the chart has turned down again. But the next leg of the bull market, the one with Gold above its 1980 highs, has already been firmly established.