"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."
(The Gold Bull Market This Week - February 8, 2008)
This week, Gold made up even more of its recent correction on Monday, February 11, closing at $US 922.90, only $US 4.20 short of its January 28 high. And it went higher yet in Asian trading on the next day. But when US trading cut in on February 12, Gold suddenly fell out of bed. Prompted by what was dubbed profit taking - and a reported drop in demand out of India - Gold fell $US 15.50 on the day. The rest of the week saw the spot future Gold price bouncing in a fairly wide band between $US 900 and 920 in intraday trading, closing at the lower end of the trading range every day.
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 more than 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 last week only to turn right around and move above them again by the end of the week. This week. the spot future price has been straddling the two moving averages as they converge at the $US 906 level. Further weakness in the $US Gold price next week, or even a flat week around the $US 900 area, will see the shorter-term moving average dip back below its longer-term counterpart.
On the weekly bar chart, not much has changed. As you can see, the weekly spread between intraday high and low prices contracted this week with the Gold closing on Friday near the bottom of the weekly range. The 10 and 20 week moving averages are still both moving up in tandem and both are still well below the spot price..
On the point and figure chart, a "distribution zone is now forming. This one is very similar to the one which formed when Gold was trying to get above its January 1980 highs in the mid $US 800s. The difference with the present zone is that it is straddling $US 900, a level Gold has never reached before. As you can see, the accelerated uptrend line on this chart gives support at about the $US 885 level.
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. A month 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. That remains Gold's high to date, with another "distribution zone" forming. But the LARGE breakaway gap, and the fact that the uptrend remains perfectly intact on the chart, points in only one direction. UP.