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"
Yes, we know that the above is EXACTLY what we started off this commentary with last week. Last week (Feb 4 - 8), the spot future Gold price had closed (just) over $US 300. This week (Feb 11 - 15), it has closed (just) under $US 300.
"... 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."
(Gold Bottom Commentary Last Week - February 8)
If anyone who has been reading these pages for any length of time continued to harbour doubts that $US 300 was THE barrier for Gold, the trading of the past week should have banished them for good. A glance at the daily bar chart (the top chart) will show that Gold "straddled" $US 300 every day this week. It's close on Friday, February 15 - at the end of a shortened trading day before the long President's Day weekend - was $US 298.40 on derisory volume of 11000 contracts.
As you can see, the daily bar chart has come back to touch its shorter-term (10 day) moving average. On the weekly chart, the bar for this week is straddling $US 300. The most interesting chart is the $US 1 x 3 point and figure chart. This week, the chart has come back to rest right on the line drawn through the previous two Gold peaks (in May and September 2001). Needless to say, a turn here would be VERY bullish on this chart, especially if Gold went on to trade $US 3.00 or more ABOVE its February 8 close of $US 303.
As was stated on these pages last week when Gold had closed at $US 303.50, we have everything we need to declare a definite bull market in Gold EXCEPT for a consolidation ABOVE the $US 300 level. We still don't have that. Gold has not blown straight through $US 300 as it did during the Sept/Oct 1999 and Feb 200 spikes. Nor has it precipitously fallen away from $US 300. So far, it has simply STAYED at - or about - $US 300.
Not only that, but the "wall of worry", a feature of every embryo bull market, is well and truly intact. No sooner did Gold hit $US 300 than Gold stocks (in the U.S., Australia, and elsewhere) stopped going up and began what are so far quite shallow corrections. Everyone is worried that this time will be like all the previous times since 1997 - $US 300 won't hold.
We think it will, and soon, but until it DOES, this market cannot yet be called a BULL market. There is no doubt at all that the global financial situation is getting steadily worse. The Argentinian currency has crashed, and more and more other Latin American currencies (the latest being the Uruguayan currency) are beginning to follow it down. The U.S. Dollar itself is faltering in its multi-year bull run.
But hope still springs eternal on "traditional investment markets". This week, the Australian market index (the All Ordinaries) came within a point of its all time high, and this at a time when the Gold index was correcting. In the U.S., the Dow made it back to 10000 - for one day on February 14 - before falling away again at the end of the week.
And then there is the reporting on Gold. Reuters, for example, is "analysing" Gold as an: "overbought but stubbornly resilient market". Even the great Hedger, Barrick, announced that it would not increase its forward sales program but will emphasise spot sales. Speculators on the Comex are net long, but they are almost always net long, while "Commercials" are very short indeed. Speculators are always wrong - right? No, not always.
We have received a number of emails over the past week castigating us for not giving a definitive BULL MARKET call for Gold. It is NOT yet a difinitive Bull market. ALL technical features on the charts point to the conclusion that it soon will be, but until Gold is firmly established ABOVE $US 300, it is still a "bull market it waiting".
As long-term Gold followers know, "bad things" quite often happen after long weekends. Last weekend was a G-7 meeting and a long weekend in Japan. This weekend is a three day weekend in the U.S.. Last week, the Comex got to start before the Topix in Japan. This week, Japan, where demand has greatly increased, has two days of trading before the Comex cuts in. We shall see if they can get gold back above $US 300.
If they can't, then Gold may languish at or below $US 300 for another week or even month. But as we said here last week, the present uptrend is perfectly intact on any Comex spot future Gold close of $US 278 or higher. And all we need for a difinitive bull market is consolidation above $US 300. Stay tuned.