We analyse the progress of the current $US Gold bottom while we wait patiently to change the name of this page to: "The Gold BULL This Week"
Those are the words we use to introduce this page on the home page of our Gold This Week section. And we have indeed been waiting patiently, having updated this commentary every week since we first posted it in 1996.
Is $US Gold now in a BULL MARKET? By every technical criteria - take a look at the charts to the left and the links to other charts above - the answer is an unequivocal YES! This is not because of the mere fact that $US Gold is now above $US 300 - for the first time in almost exactly two years. It is much more to do with the "price action" that $US Gold has gone through in the process of rising from the $US 255-56 level in April 2001 to the $US 303.50 level now.
Look at the weekly bar chart to the left. Over the week of Jan 28 - Feb 1, Gold confirmed the uptrend line which has been intact ever since April 2001 by rising from $US 279.10 to $US 286.00. This past week - Feb 4 - 8 - Gold has risen $US 17.50 to $US 303.50. This is a new high for the post April 2001 uptrend, fully $US 10 higher than the previous one. It is also above $US 300 - after four days of flirting with that level.
Yes, Gold has spiked above $US 300 before. It did so in Sept/Oct 1999 and again in February 2000. During both these spikes, Gold "action" was FAR more intense than it has been this time. Both spikes did not "stop" or even "slow down" at $US 300, they blew right through those levels.
But please look closely at the longer term weekly Gold chart. The chart will open in a separate window so you can refer to it as you read on. Please note ALL of these chart features:
First, when Gold spiked in Sept/Oct 1999, it blew right through the downtrend line which had confined it ever since the top of the last bull market which ended in February 1996. This was the first clue that Gold had BOTTOMED.
After that, with the exception of a couple of weekly lows - GOLD NEVER WENT BACK BELOW THAT LINE AGAIN.
Now, look at the Gold action between the Sept/Oct 1999 spike and the second "bottom" in April 2001. Notice that each Gold high was LOWER than the previous high, and each Gold low was LOWER than the previous low. Gold had established another downtrend - but this one was ON TOP OF the downtrend line which had confined the price before the Sept/Oct 1999 spike.
Look at the second "bottom" on the chart - reached in February and again in April 2001. You can see that this was almost the exact level which Gold reached in August 1999 - before the first spike.
Now, look at the price action since April 2001. Each high is HIGHER - each low is HIGHER. This action gives an uptrend and CONFIRMS that Gold has bottomed.
Finally, look at the far right bar - the action over Feb 4 - 8, 2002. This action CONFIRMS the uptrend. It is also a powerful signal that the entire Gold BOTTOMING formation is OVER
If a market bottom has long since been confirmed, and a market has been in an uptrend for nearly a year which is also confirmed, then by any technical criteria, that market is a BULL market. That is true of ANY market - even the market under discussion - the $US GOLD market.
Yet because we are dealing with Gold, the political metal, and the anathema of all borrowing and credit creating governments and central bankers everywhere, there must be "caveats". The first and most obvious is that Gold has NOT YET consolidated above the $US 300 level. Until it does, we cannot be absolutely sure that the bull market is completely solid.
There is NO doubt that the Gold market is at present "climbing a wall of worry". Fear has definitely NOT given way to greed, not yet. This is the BEST POSSIBLE situation for any nascent bull market. Underconfidence is the norm at the BEGINNING of any bull market - an example is the Dow in late 1982 or Gold in late 1976. Overconfidence is the norm at the END of any bull market - an example is the Nasdaq in early 2000 - or the Nikkei in late 1989.
There is one further immediate caveat. This weekend, the G-7 Central Bankers are meeting in Ottawa, Canada. We have more to say about that in our main commentary.
We can only repeat - technically, this is a BULL market. It will remain intact on any Gold price above $US 278 - the bottom of the post April 2001 uptrend. It will receive FINAL confirmation if and when Gold consolidates ABOVE the $US 300 level.