Last week, we got the $US 1000 level in terms of intraday highs. This week Gold traded in the $US 1030s in Asia and in the $US 1020s in Europe and the US intraday. We also got two spot futures closes in New York above $US 1000 on March 17 and 18. But then, in an instant reaction to the FOMC meeting the results of which were announced after Gold closed on the day, we got the BIG sell-off. On March 19-20, Gold plummeted from $US 1004.30 to $US 920.00 on the US futures markets. The $US 1000 level - The Last Hurdle - has held.
Please take a look at this weekly Gold bar chart stretching back to 1999. You can see that Gold hit the top of its bull market upchannel on this chart precisely before the abrupt downturn late this week. In two days, Gold has given up about half of its 2008 gains in US Dollar terms.
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. It has continued to fall since then and this fall has accelerated over the past two weeks. Last week, the USDX fell 1.37 points or 1.88 percent to 71.67. On Monday, March 17, the USDX hit a nadir of 71.30. Then came the turnaround, almost two full points in three trading days.
Gold has now spent two months 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. This week, we got the first $US 1000 spot future close, and then the big sell-off.
As you can see on the daily chart, the Gold price was gap down for two straight days and is now well below both 10 and 20-day moving averages. Unless this big fall is reversed VERY quickly, the moving averages will cross over, with the 10 day moving below the 20 day, fast. As you can see, this has only happened once, and then only very briefly, over the year to date.
On the weekly bar chart, we still had higher highs this week but, in stark contrast to recent weeks, we had a significantly lower low too. This week, for the first time since the big run up began last August, Gold closed for the week below its ten week moving average. Major support on this chart is the 20 week moving average, currently just below the $Us 880 level.
On the point and figure chart, the very steep uptrend line has been sliced clean through this week. For a better view of this, please see this chart. There are numerous support points on this chart between the present level and the area around $US 880-890 - similar to the major support on the weekly bar chart (see above).
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?"
In late January, EVERYTHING was broken to the upside with Gold reaching new all time highs in $US terms. Gold then surged toward the $US 1000 level and reached it early this week before the big sell-off. Now, as you can see, the big sell-off has caused a downturn all the way down to the top of the previous distribution zone. There is, as yet, no "correction" on this chart. For that we would need a close below the $US 900 level.