Having been reading these pages, you know that we think that the Gold bull market has now begun. On "this trip" above $US 300 (Gold also poked above $US 300 in February), the spot future price has been at or above the $US 300 level since it rose $US 5.40 on March 27 to close at $US 302.20. That was just over 6 weeks ago.
Of course, it took Gold just on a month - until April 26, to break the $US 310 level. And so far, it has hovered around that level ever since. The spot future closes for the past three weeks have been:
Gold spent a month consolidating just above $US 300. It has now spent two weeks consolidating just above $US 310. During this period, open interest on the Comex has risen by about 34% (148480 contracts to 199520 contracts). As recently as December 4, 2001, Comex Gold open interest was only 103400 contracts. It has almost doubled so far this year. As of the latest "Commitments of Traders" figures released on May 7, "Speculators" were 2.4:1 long while "Commercials" were 2.8:1 short.
If you think "short interest" amongst the "Commercials" is fading, consider this. On December 4, 2001, TOTAL open interest (all contracts) was 103400. On May 7, 2002, "Commercials" held a total short position of 128868 contracts. That's a short position which is almost 25% higher than the TOTAL open interest position was just five months ago.
Let's take a clear-eyed look at all this. Gold was never going to go up in $US terms without a BIG fight. And it hasn't. Borrowing Gold is still easy, and VERY "cheap". Look at Gold lease rates. As you can see, there is a suggestion in a "bottoming" in rates, but the "long" one year rate is still only a whisker above the 1.0% level.
And if you go from there to check out the relationship between Gold and the $US Index, you can see that the Dollar is falling faster in terms of other currencies than Gold is rising in terms of the Dollar. Since Gold broke above $US 300 on March 27, the $US index is down 3.98% (118.91 to 114.18) while Gold in $US terms is up 3.01% ($US 302.20 to $US 311.30)
So, progress is slow - but steady. The charts on this page are all looking perfect. The bar charts have shorter-term moving averages comfortably above the longer-term ones. The point and figure chart is waiting for another upturn - which it would get at a spot future Gold close of $US 312 or higher.
Meanwhile, the Fed sits on its hands on U.S. interest rates while more and more nations decide that it is time to start raising theirs. The latest nation to join this banwagon is Australia, where the Central Bank raised its controlling rate by 0.25% on the day after the Fed announced they were standing pat. U.S. markets have amazing "surges" (the Dow suddenly "boomed" by 305 points on May 8) which are cordially ignored by foreign markets. With good reason, as the U.S. markets turned on a dime and gave most of their gains back by the end of the week.
Treasury Secretary O'Neill is STILL pleading with Congress to raise the U.S. debt limit. There is actually a "time limit" on this one - June 28 - when Congress must meet $US 60 Billion plus in debt coming due.
By now, the performance of Gold and Gold stocks compared with the more "traditional" investments which Americans and non-Americans alike still cling to is becoming very difficult to ignore. Even the mainstream U.S. press is mentioning Gold, and pointing to the fact that Gold stocks have drubbed every other type of stock so far this year.
But the tanacity of investors is remarkable. It would seem that a 2 year plus stagnation (or bloodbath in the case of the Nasdaq) is not yet enough to "wean" them away from the stock market. Having enjoyed 20 years of bull markets, the habit is dying very hard indeed. And of course, having been told repeatedly about the "20 year Gold BEAR market", very few are yet "brave" enough to take the plunge in the barbarous relic.
This will change, slowly. But long before the "masses" are stampeding into Gold, Gold will have shaken off its magnetic attraction to the $US 300 level. We haven't even seen it do that so far. For the Gold bull market, it is VERY early days yet.