Seasonally, Gold usually has a very good December/January period, then a bad period from very early February until mid/late March. And then another good period from late March until early/mid May. And so this February began, but the "script" was not followed after February 5, the day that spot future Gold fell $US 19.00 to close at a two-week low of $US 885.90.
Between January 28 and February 5, Gold fell $US 41.20. But in the three trading days since February 5, it reversed and stormed upward by $US 32.50, closing (spot future basis) on Friday, February 8 at $US 918.40. Please note that this does not necessarily mean that Gold's usual "seasonalities" will not play out this time with Gold going up even faster than it went down. We are not yet back to the January 28 high. It is significant, though that Gold only closed below the $US 900 level once in its downturn, and has now made up almost 80 percent of its losses in a mere three days.
Even more significant, this snap back in the $US Gold price has come in the face of a rising US Dollar. The $US index (USDX) closed at 75.70 on January 28, the day when spot future Gold closed at $US 927.10. As recently as February 8, the USDX had risen as high as 77.12 (its high for the year). Yes, the USDX did lose 0.30 points on February 9 (while Gold was rising $US 12.30) to close for the week at 76.82, but it still posted a gain of well over one full point in the week. Gold rose in spite of this.
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 a month well above its previous spot high of $US 850 and has only dipped back down below the $US 900 level on two brief occasions since it first closed above $US 900 on January 14.
As you can see on the daily chart, the Gold price fell below both 10 and 20-day moving averages this week only to turn right around and move above them again by the end of the week. The shorter term MA remains above its longer term counterpart. For this pattern to be maintained, the spot future close is going to have to keep rising and to get above its January 28 $US 927.10 spot closing high in the near future.
On the weekly bar chart, the Gold correction early in the week did not bring the spot future price back down to either the 10 or 20-week MA. This chart is still perfectly intact, the only difference on the weekly chart is that Gold had lower highs and lower lows this week. On February 9, the spot future closing price was $US 56 above the shorter term - 10-week - moving average.
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 went on to reach new all time highs last week on the chart. This week, we got the downturn and the immediate snap back. The level to watch for now is $US 932 or higher - three "Xs" above the January 28 high.
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. 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. The chart turned down again with the 14 fall on February 1 only to turn up again on February 6. Now, we have a full "distribution zone" on the chart. The BIG number would be a Gold close of $US 940 or higher, three "Xs" above the previous chart high. If we reach that level, everything is in place for a run towards the $US 1000 level.