Last week (March 8), spot future Gold closed at $US 290.30. This week (March 15), it has closed at $US 290.10. Things are quietening down. Daily volume on Comex is diminishing and open interest is slowly falling too. This week, the $US 290 level has held - just. We will see if it holds next week.
Gold spent five weeks flirting with the $US 300 level, now it has fallen to the $US 290 level twice in the past eight trading days. The dividing line was March 5, the day of the last Bank of England Gold auction. On the day of the Auction, Gold'd intraday high in New York was $US 299.40. Two days after the auction, Gold closed at $US 290.50.
As you can see on the daily bar chart, Gold has been sliding very slowly and has not established a tentative "support level" at $US 290. We say "tentative" because for $US 290 to firm as support, Gold is going to have to turn up from present levels next week just as it did at the beginning of this week. If it doesn't, If spot future Gold slips below $US 290, then there is little support this side of $US 280.
That support ($US 280) is clearly shown by the trendlines on both the weekly bar chart and the point and figure chart. On the weekly bar chart, the longer-term (40 week) moving average presently stands at $US 280.41. On the $US 1 x 3 point and figure chart, the uptrend line which has supported this upmove since last April stands at or just above $US 280.
As you can also see on the point and figure chart, Gold's upchannel is bounded on the top by $US 300 and the bottom by $US 280. At it's March 15 close of $US 290.10, Gold is right in the middle of the channel. Resistance is at $US 300, just as it has been ever since late 1997. Major support is at $US 280, just as it has been since Gold made its run at $US 300 in early February this year. Minor support is at $US 290. Why $US 290? Because Gold has now reached that level twice - on March 8 and again on March 15.
Technically, Gold could go either way in the short term. As long as it stays above $US 280, the uptrend is intact. And as long as Gold stays below $US 300, the Gold bottom which has been building ever since September 1999 remains just that, a bottom. We will not have a Gold bull market unless and until Gold gets above $US 300 and STAYS there. We haven't seen that happen since November 1997 - nearly 4 1/2 years ago.
What is interesting is that investors, and specifically U.S. investors, are not yet taking anything going on in markets other than the stock markets seriously. They are not noticing the weakening Dollar, or ever-climbing Treasury yields, or higher ($US) oil prices, or the BOOMING CRB (Commodity Research Bureau) index.
Over the past three weeks, while Gold has been fighting a so far losing battle with $US 300, the CRB index has rocketed from 191.71 to 203.49. That's a rise of 11.7 points or 6.1%. Three weeks ago, Gold closed at $US 293.20. Had Gold risen with the CRB index, it would presently stand at $US 311.10 (6.1% above $US 293.20). Given the rise in all other "commodities" over this period, due in part to the weakening Dollar, this would seem quite reasonable. And it would be quite reasonable, if Gold was nothing but a "commodity". Clearly, it is more than that.
Gold is alternative money. It is also an alternative to investments in conventional markets - like the stock, bond and currency markets. Right now in the U.S., two of those three markets are looking decidedly shaky. The U.S. Dollar has been falling against the currencies of its major trading partners ever since it hit its 2002 high at the end of January. Treasury bond yields hit their highs for the year on March 14, before yields on the the longer-term paper fell slightly on Friday. But ominously, yields on ALL Treasury paper (including three and six month paper) are now ABOVE the present Fed Funds Rate. On March 15, three-month paper yielded 1.84% while six-month paper yielded 2.05%. the present Fed Funds rate is 1.75%.
The other U.S. conventional market, the stock market, has recently rallied and is now marking time. Investors have already been convinced of the "recovery" and are now waiting impatiently for it to spill over into increased corporate earnings. The only people who do not seem to expect this increase are those who are expected to provide it, the CEOs and managers of these same corporations. Somebody is going to be proven wrong here - soon.
If (when) the stock markets falter, all "conventional" investments will come into question. If (when) that happens, Gold will start upwards again. In the meantime, Gold sits right in the middle of its upchannel with its immediate movement (up or down) a 50/50 proposition. Stay tuned.