Another big precious metals sell-off at the start of this week as Treasurer Paulson reported on the plans being made for putting the real US economy into a regulatory straight jacket while bailing out the financial system. Gold fell nearly $US 48 on this news, hitting a spot future close of $US 882.90 on April 1. It couldn't have been an "April Fool", futures Gold trading does not cut off at noon.
The rest of the week was spent with Gold rebounding from those levels, to the extent that by the close on Friday, Gold had regained the $US 900 level to close at $US 909, regaining about 60 percent of its start of the week losses. After hours trading on April 4 saw the price climb as high as $US 914.
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. This week, has moved slightly higher and closed on April 4 just over a point above its all time lows of three weeks ago.
Gold has now spent nearly three months well above its previous spot high of $US 850 and only dipped back down below the $US 900 level on two brief occasions between closing at $US 900 on January 14 and exceeding the $US 1000 level in mid March. This week, Gold dipped below that $US 900 level again before regaining it by the end of the week.
As you can see on the daily chart, the Gold price plummeted two weeks ago, falling well below both 10 and 20-day moving averages. Last week, that fall had the inevitable consequence of pushing shorter-term 10 day moving average back below its longer-term 20 day counterpart. This week, Gold remains below both moving averages with the longer-term MA about $US 10 above the spot future Gold price at week's end.
For the first time since the big run up began last August, Gold closed for the week below its ten week moving average two weeks ago. This week, Gold dipped below its longer-term 20 week moving average when it dipped below $US 900 on April 1. By the end of the week, the price had recovered to stand mid way between the two MAs.
On the point and figure chart, the very steep uptrend line was sliced clean through two weeks ago. For a better view of this, please see this chart. This week saw a second steep downturn on the chart. The first resistance point on this chart now lies at the $US 920 level, the bottom of the first downturn from the $US 1000 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 to $US 1000, 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 in mid March 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. That was almost immediately followed by another downsurge back below $US 900 to $US 890 on April 1. And now, we have yet another upturn on the chart.