Last Friday, the first of the big New York banks reported its first quarter earnings and the US stock market tanked. For most of the week just ended, the US Dollar sank, getting perilously close to the all time lows on the USDX it set in mid March. Gold rose slowly but surely, reaching as high as $US 945 on April 16.
But despite all this, coupled with an oil price which set new records almost every day this week, the US stock market did not repeat its sell off of last Friday (April 11) as more bank earnings reports came out. Yes, the banks did have lower earnings, but not as low as market "expectations". Yes, the quarter did show losses on the banks' books, but not as low as market "expectations".
On April 18, Citigroup reported. The actual numbers were not as bad as feared. US stock markets leaped higher and the US Dollar recovered a small bit of ground. The oil price hit nearly $US 117. The non "headline" precious metals, platinum and palladium, were both up on the day. So what went down? Gold - and Silver - with almost all the damage being done in New York after the rest of the markets had closed for the weekend. It's getting pretty blatant, and pretty desperate, out there.
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, the Dollar hit a new record low against the Euro mid week before staging a small recovery.
Gold has now spent 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 reached as high as $US 945 mid week before the big April $US 27.60 sell off.
As you can see on the daily chart, the Gold price plummeted a month ago, falling well below both 10 and 20-day moving averages. Three weeks ago, that fall had the inevitable consequence of pushing shorter-term 10 day moving average back below its longer-term 20 day counterpart. This week, the rise to $US 945 actually pushed the 10 day MA back above its 20 day counterpart, and then came the Friday sell off.
For the first time since the big run up began last August, Gold closed for the week below its ten week moving average three weeks ago. Gold dipped below its longer-term 20 week moving average when it dipped below $US 900 on April 1. That didn't last. As you can see, Gold has essentially been going sideways for a month now. That remains the case on the chart this week, despite the big sell off on April 18.
On the point and figure chart, the very steep uptrend line was sliced clean through a motnh ago. For a better view of this, please see this chart (link in original analysis). Last week, the recovery saw Gold push above the first resistance point on this chart at the $US 920 level where it remained at the end of the week. This week, the price made it to $US 945 on a spot future closing basis before the big sell-off on April 18.
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.
(Link to chart here in original analysis.)
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. Since then, Gold has been bouncing between $US 910 and 945.