The Last Gold Bear Market:
Gold fell from $US 499 to $US 325 between December 1987 and March 1993. The extent of this fall from top to bottom was 34.87%. The duration of the bear market was 5 years and 3 months (63 months).
The Present Gold Bear Market:
Gold fell from $US 414 in February 1996 to a low of $US 253 in September 1999. The extent of this fall is 38.89%. With no bull market yet established, the present bear market has lasted for exactly 5 years (60 months).
"...in three days, Gold rose $US 10.60 to scorch right through the $US 260s and close for the week at $US 271.50. That is spot future Gold's highest close so far this year. The last time that Gold closed above $US 270 was on the last trading day of 2000.."
(Quoted on this page on March 9)
First Gold rallied from $US 256 to $US 268 in late February. Then it rallied from $US 260 to $US 272 in early March. Last Monday (March 12), spot future Gold closed at $US 272.30. Things were starting to look very interesting.
That was four days ago. Over March 13-16 (with a Bank of England Gold auction in the middle), spot future Comex Gold fell $US 13.90 to close the week at $US 258.40.
$US Gold has fallen 5% in four days. Over the week, the $US index rose 3.6%. That, in a nutshell, is the main reason for the fall in the $US Gold price this week. But it isn't the only reason.
What is the change in market sentiment that has all of a sudden made Gold a pariah (instead of something completely ignored)? It is a complete market panic in the second biggest economy in the world, Japan - and a close approach to panic in the BIGGEST economy in the world, the U.S.A..
Interest rates of all descriptions (emphatically including Gold lease rates) have plummeted this week as investors abandon practically everything, including the U.S. stock market, for the "safety" of U.S. Treasury debt and U.S. Dollars.
We won't go into an analysis of this phenomenon here, as that belongs on our Gold This Week page. Here, we will simply consider the technical situation for U.S. Gold
As you can see on the charts on the left. $US Gold has come back almost all the way to where it started from in late February. The only difference is the speed of the decline. Gold has retraced all of last week's rise - and a little bit more - in four trading days. The spot future price is once again below its 2000 lows, and only $US 2.10 above its 2001 low close set on Feb. 20.
Again, support becomes that 2001 low of $US 256.10 and below that, the 1999 low spot future close of $US 253.00. The situation on world markets is obviously critical with Japan in tatters and the Dow dipping below 10000 twice this week. We do not know how long this panic rush into the Dollar will last. We do know what the ONLY alternative to the Dollar is. That's right, it's Gold.
Again, the ultimate contest is between the world's reserve currency (with all other currencies sidelined) and Gold. As unease grew this week, the Dollar came out on top. Gold is back in the bottle - for now. Stay tuned.