Well, "volatility" is certainly making itself felt, isn't it? Of course, it's not just Gold that is bouncing around all over the place, almost everything is. Just to encapsulate the adventures since Gold slipped back below the $US 900 level late last week, we had the $US 23.30 fall of May 29 neatly "bookended" by a $US 23.50 rise on June 6 - which brought Gold right back to the level it had fallen from on May 29.
Some fairly interesting adventures in between these two though. None more so than what happened on June 5 when oil rose $US 5.50 and the $US index (USDX) fell 0.43 - and Gold FELL $US 8.30. Even Silver was up $US 0.23 on the day. We cannot remember the last time we saw a "shear" of such magnitude between the Gold and Silver price.
At any rate, a $10.75 rise (the largest one day rise ever in nominal terms) for oil on June 6 coupled with a BIG fall in the USDX finally got Gold moving again. It didn't help that the May US unemployment number - up 0.5 percent to 5.5 percent - was the worst in 22 years either.
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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Please note the performance of Gold in $US since March 2002 compared with the Dow. Yes, we know, Gold doesn't earn any interest. It has merely outperformed the Dow by a ratio of about 11.5 to 1 on a percentage basis.
The USDX has now closed below the vital 80.00 level since September 7 last year. It has continued to fall since then and accelerated down 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. A month ago, the Dollar hit a new record low against the Euro mid week but did not quite fall to its March lows on the USDX. Two weeks ago, the USDX fell again - to 71.97, only to recover almost a full point by the end of May to 73.00. The latest bout of weakness has seen the USDX fall 1.07 points on June 5-6.
Gold has now spent most of 2008 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. Then came the big correction - down just over 15 percent to 850 by the end of April. Three weeks later, with Gold closing at $US 925.80, almost exactly half of that correction had been retraced. And after a lot of "bouncing around" this week, we're right on the $US 900 level again.
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 little over 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. Then a rise to $US 945 actually pushed the 10 day MA back above its 20 day counterpart. But that didn't last long as Gold fell to $US 850 by the end of April. Gold then gained $US 60 in less than two weeks only to give more than half of that back this week. The shorter-term MA once again crossed well above its longer-term counterpart last week. This week, the shorter-term MA has once more dipped below its longer-term counterpart just as the Gold price spikes up above both one more time.
For the first time since the big run up began last August, Gold closed for the week below its ten week moving average at the end of April. In mid May, the 10-week MA moved below its 20-week counterpart for the first time since the beginning of the "credit squeeze" last August. That remains the case this week with the Gold price closing the week right at its shorter-term (10 weekO) MA.
On the point and figure chart, the very steep uptrend line was sliced clean through in late March. For a better view of this, please see this chart (link appears here in original analysis). Gold fell as low as $US 852 - on the chart - in late April. The first three weeks of May saw a recovery as Gold broke back well above the downtrend line established since the fall from the $US 1000 level in mid March. Please note that Gold turned up right on the line with its big $US 23.50 surge on June 6.
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.
Gold's big run up to $US 1000 started in September 2007 with the metal ending the year just below its all time highs in $US terms. It rose above the $US 800 level on November 2 and to all time highs above the $US 900 level on January 14. Then came mid March and $US 1000, and then came the correction.
Gold was back below $US 900 at $US 890 by April 1 and then bounced between $US 910 and 945 until late in the month when it dipped below $US 900 and fell to $US 855 by the end of the month. That remains the correction. This week, Gold continued its bouncing between about $US 875 and $US 900, the latest entry on the chart being the big $US 23.50 surge to $US 899 on June 6.