"All that is left for a definitive $US Gold BULL market is for the price to continue up from here. A spot future close of $US 308 or higher would give final confirmation on this chart that Gold had distributed above its downtrend and broken out to the upside. That's all we need to CONFIRM the bull market."
(Gold - Bottom or Bull Market? Friday, April 19)
As you probably know by now, the move on the spot future Gold closing price over the week has been only $US 0.90 (April 26 $US 311.60 - May 3 $US 312.50). But look at the "action" over the week, keeping in mind the quote which begins this analysis and which was written two weeks ago on April 19.
Gold reached $US 308 on April 25 when it closed at $US 308.10. It climbed to $US 311.60 the next day and then corrected over the next four days, falling back to $US 308.60 (spot future close) on May 2. Then, on Friday May 3, spot future Gold rose $US 3.90 to set a new high spot future close for 2002 of $US 312.50.
Please note the significant fact that the $US 308 level provided SUPPORT for Gold during its (admittedly very small) correction this week. This provides further STRONG evidence that the $US 308 level was INDEED the "trigger" for the bull market that we wrote about two weeks ago.
Looking at all the charts on the left, Gold continues to gather strength slowly but surely. Hardly surprising, on the surface, given the increasing weakness in the $US Index. In fact, Gold was down this week in terms of both Euros and Yen.
On the top chart, the daily bar chart, Gold has bounced off its short-term (10 day) moving average after having set up a three day "floor" right around the $US 308 level (see above). The weekly bar chart and the point and figure chart have simply kept right on climbing, with the point and figure chart having gone straight up from the $US 300 level. All in all, a mighty fine technical picture.
In fact, ALL technical signs point to Gold continuing to rise. The most interesting indicator we follow is the one we highlighted here last week, and that is Gold lease rates.
Consider the "long" (one year) LIBOR lease rate since April 25, the day it dropped below 1.00% for the first time in our data series. Here's the record:
Pretty clear, isn't it? The one year lease rate is "cycling" around its historic lows at the 1.00% level. Note here that the biggest upmove came on May 3, the same day that Gold hit a new 2002 high of $US 312.50 and the same day that U.S. Dollar weakness increased dramatically with the $US index falling 1.23 points to 113.87.
Two weeks ago, on April 19, our main Gold commentary focussed on signs to watch for, and prominent amongst those signs was Gold lease rates. We can sharpen that commentary even more now, with the one year rate bouncing around at 1.0% and Gold heading inexorably higher.
The more that this present $US Gold market is perceived as a BULL market, the farther ahead the time horizon of those interested in Gold will become. As this time horizon lengthens, attention will focus on such things on longer maturity contracts on the COMEX and on longer-term Gold lease rates. What we are looking for here is for the one year rate to establish a firm floor - likely at or about the 1.00% level - and then start to RISE.
Such a rise, if (when) it occurs, could very well be the signal for an upside acceleration in the Gold price. So far, the Gold move has been pretty gradual, but in all BULL markets, there comes a phase, after it is recognized by a "critical mass" of investors, when the move speeds up, often dramatically. Watch the Lease rates closely.