Well, the Gold "seasonalities" we have been discussing in recent weeks certainly have not applied in February 2008. Nor (at least so far) has the desperate attempt to derail the Gold bull by the Bush Administration with their recent announcement that they would go along with any IMF Gold sales. The IMF is a creature of the US, by the way, since the US can veto ANY proposal put forward by that august body. No other participating nation can do that. So much for the "INTERNATIONAL" Monetary Fund".
The last two weeks have been absolutely stellar for Gold, as it has moved three-quarters of the way between $US 900 and the big $US 1000 over that period. Even more stellar has been the performance of Silver as many people have opted for the (much) cheaper precious metal alternative. Many people still follow a Gold:Silver "ratio", even though that ratio has been set up and maintained by government fiat for centuries. The "traditional" ratio between Gold and Silver has been at or about 16:1. Right now, the ratio is almost 50:1.
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 last year and fell to the lowest point in its history - going all the way back to March 1973 - on November 22. This week, that November 22 low has been taken out with the USDX falling a HUGE 1.82 points or 2.4 percent this week to close at a new all time low of 73.75. There are NO support points left on the USDX. There havent been since September last year.
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. And this week, spot future Gold traded above $US 975 for the first time on an intraday basis. Only $US 25 left to the $1000 level.
As you can see on the daily chart, the Gold price fell below both 10 and 20-day moving averages three weeks ago only to turn right around and move above them again. Last week. the spot future price soared higher and the shorter-term 10 day moving average crossed back above its longer term counterpart. This week, the gap has widened substantially as Gold continued upward in a seemingly inexorable push towards $US 1000.
On the weekly bar chart, Gold still keeps marching higher. As you can see, the weekly spread between intraday high and low prices expanded quite a bit with the Gold closing at new all time highs over the last four days of the week. 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, the "distribution zone" which was forming since the late January Gold highs has been decisively broken to the upside. This is very similar to what happened 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. And now, having broken above that zone, Gold is three-quarters of the way to $US 1000
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, which started in September, 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. Now, that breakaway gap has been validated with Gold rising well over $US 70 over the last two weeks. Only five more "Xs" to go on this chart to the big $US 1000.