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).
Two weeks ago, $US Gold rose about $US 11. Last week, it fell about $US 14. This week, it has reverted to the "norm". In other words, it has just stood there - in $US terms, that is. Have you noticed how often the $US Gold price "telegraphs" a big change in the financial markets, and then when the big change hits, the $US Gold price just stands there?
That was certainly the case this week. The "big change" was the reaction of U.S. stock markets to the Fed's March 20 rate cut. When the Fed cut rates three times in seven weeks in late 1998, the market took off - upstairs. When it cut three times in eleven weeks in early 2001, the market took off - DOWNSTAIRS!
The old "three strikes and you're out" rule on U.S. markets has been turned on its head - twice in less than two years. When the Fed RAISED rates three times in late 1999 - the U.S. market BOOMED. Now, the Fed has LOWERED rates three times in early 2001, and U.S. market have BUSTED.
This week, Gold actually managed to climb $US 3.30 from $US 258.40 to $US 261.70 - spot future basis. Not bad in a week when the $US index leaped to its highest level since November 2000 - 116.48 on March 23 - the same day as the Dow was plumbing an intraday low of 9106.54
As you can see on the charts on the left, support levels have held. Look at the channel on the P&F chart. You can see that Gold turned exactly on the lower line of the channel. You can also see that the two lines are drawing ever closer together - they are now only about $US 5.00 apart.
And on the (daily and weekly) bar charts, you can see that despite Gold's quiescence this week, the price is actually increasing in volatility. It is safe to say, especially with the traumatic week on world stock markets this week, that this volatility is going to continue, if not increase.
The ultimate contest remains as being between the world's reserve currency (with all other currencies sidelined) and Gold. If The Privateer is right, and the main impetus for foreign Dollar buying is not to seek a "safe haven" but to preserve their leveraged U.S. investments, then the lower U.S. markets go, the harder that is going to be to do. At some point, the search for a REAL safe haven will inevitably begin. Stay tuned.