Quite a week. By Tuesday, April 22, the US Dollar index was down to a close of 71.54 points, a mere 0.24 points above its all time low set back in mid March (when Gold hit $US 1000). The Euro hit $US 1.60 for the first time. Oil prices hit $US 120. And food prices (notably grain prices) went ballistic. Gold recovered marginally from its April 18 sell-off.
By the end of the week, the USDX had recovered quite dramatically. Oil prices had fallen and then rebounded to close the week at about $US 118.50. Food prices were still soaring with supermarket shelves beginning to be stripped bare across the US. And the Gold price? Well it had tumbled more than $US 35.00 on April 23-24 and closed the week firmly back below the $US 900 level.
The usual "suspects" were trotted out for this Gold price fall. Gold had "disappointed" traders by not keeping up with the rise in other commodities, notably oil and grains. There was an increasing "feeling" on Wall Street that the worst of the credit squeeze might be past. The Fed is now expected to ease off on its rate cuts and start to target "inflation".
At any rate, at its close of $Us 887.20 on April 25, Gold is now nearly back to its post $US 1000 low of $US 882.90 set on April 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. 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 but did not quite fall to its March lows on the USDX. It then recovered significantly by the end of the week.
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. It has again closed below $US 900 on two occasions since it hit that $US 1000 level - on April 1-2 and now again on April 24-25.
As you can see on the daily chart, the Gold price plummeted in mid March, falling well below both 10 and 20-day moving averages. A month ago, that fall had the inevitable consequence of pushing shorter-term 10 day moving average back below its longer-term 20 day counterpart. Last week, the rise to $US 945 actually pushed the 10 day MA back above its 20 day counterpart. With the sell-off on April 18 and the further move down below $US 900 on April 23-24, Gold is again well below both MAs on this chart. The 10-day MA is still above its 20-day counterpart. Without a BIG surge in Gold in the week to come, that won't last long.
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. It has now done so again with the move back below $US 900 this week.
On the point and figure chart, the very steep uptrend line was sliced clean through a month ago. For a better view of this, please see this chart (link appears here in original analysis). Last week, the price made it to $US 945 on a spot future closing basis ($Us 950 intraday) before the big sell-off on April 18. And of course the sell-off has continued this week with Gold back below $Us 900 for the second time this month.
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 (link appears here in original analysis) 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 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. Gold then bounced between $US 910 and 945 until this week, when it dipped below $US 900 again.