Last week we got the big Gold and silver sell-off. This week we got the rebound, up until March 28 when Gold fell $US 18.20 to pare its gains on the week to a little over $US 10.00. This was accompanied by a huge fall in open interest in the US futures markets, where open interest in the active future has plummeted by 80,000 contracts - about 16 percent - since March 14. It was also accompanied by short-term (one and two-month) Gold lease rates actually falling into negative territory.
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 last week. We got a turnaround this week in turn went south again on March 28. The sell off that day was "blamed" on an upturn in the US Dollar. On the day, the USDX was up a princely 0.06 points. At it's present levels the USDX remains less than 1.00 points or a little over one percent a above the all time lows it set on March 17. To put this in perspective, the USDX was down well over 1.00 points this week.
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 in the first half of March. On Monday, March 17, the USDX hit a nadir of 71.30. Then came the turnaround, almost two full points in three trading days last week. This week, the USDX has given up more than half of those gains, despite the anaemic upmoves on March 27 and 28.
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. Last 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 last week, falling well below both 10 and 20-day moving averages. This week, that fall had the inevitable consequence of pushing shorter-term 10 day moving average back below its longer-term 20 day counterpart. Gold remains below both moving averages.
On the weekly bar chart, last week saw higher highs but, in contrast to previous weeks, significantly lower lows on the week too. And, for the first time since the big run up began last August, Gold closed for the week below its ten week moving average. As you can see, Gold's recovery early in the week this week pushed the closing price back above that 10-week moving average, only for it to dip back below in in the $US 18 March 28 sell off.
On the point and figure chart, the very steep uptrend line was sliced clean through this week. For a better view of this, please see this chart. This week saw the up turn on the chart as Gold gained just over $US US 30 on March 25-26, and then another downturn with the March 28 fall.
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 last week before the big sell-off, which caused a downturn all the way down to the top of the previous distribution zone. When Gold closed up $US 14.20 to $US 949.20 on March 26 we got the upturn on the chart. The $US 18 fall on March 28 has not - quite - turned the chart down again. For that we would need a spot future close of $US 930.00 or lower.