Last week, we reported that Gold had hardly moved for two weeks. Well, make that three weeks. Here are the spot future Gold closes since April 26:
What HAS moved over the past three weeks, in fact it has been moving - down - ever since the end of January, is the U.S. Dollar. While Gold was falling from $US 311.60 to $US 310.90 (0.22%) from April 26 to date, the $US index was falling from 115.23 to 113.16. That's a fall of 2.05 points or 1.78% - and more than HALF of that fall came on Friday, May 17 alone when the $US index fell 1.16 points from 114.34 to 113.18.
You may have been under the impression that the financial "powers that be" were in the process of losing control of Gold since it breached $US 300 way back on March 27. Actually, they are not - YET. What they ARE losing control of is the exchange value of the U.S. Dollar. When Gold breached $US 300 by jumping $US 5.40 on March 27 to close at $US 302.20, the $US index closed at 118.91. Since then, Gold has risen $US 8.70 or 2.88% while the $US index has fallen 5.73 points or 4.82%.
For nearly a month, Gold has been held all but stationary while the $US falls away. This is a situation which cannot last for much longer. Either the $US must stop what is increasingly looking like a free fall, or Gold must start to rise to reflect the fall in the $US.
On the charts to the left, very little has changed. The Gold price dipped briefly below the longer-term (20 day) moving average on the daily bar chart when it closed at $US 307.60 on May 14, but it has recovered to be nicely above both moving averages. The weekly bar chart shows no substantive change, simply another sideways week. And the point and figure chart has not changed at all since last Friday (May 10).
Looking at the longer-term weekly bar chart, one interesting feature is starting to emerge. If you look at the moving averages (20 and 40 week) on the chart, you can see that the last time that EITHER of them was above $US 300 was back in 1998. Well, the shorter-term MA is now up to $US 297.15. At its present rate of increase (about $US 2.00 a week) it will breach the $US 300 by the end of May. The last time that this moving average was above $US 300 was the week ending on Friday, July 7, 1998. That's almost four years ago.
Looking at the Commitments of Traders, there are two features this week. First, total open interest has dropped quite substantially, from 199,520 contracts on May 10 to 184,750 contracts on May 17. That's the first fall in the total contracts since the week ending on March 28, the week when Gold breached $US 300
The latest data on the actual commitments of Traders is as of May 14. It shows that in the week from May 7, the main "dampening" factor in the decline in total contracts (which was just getting started on May 14) was a decrease of 6686 long contracts amongst the "speculators". However, the "commercial" position was almost the mirror image of this. Commercials increased their long positions by 6611 contracts over the same week. Interesting, isn't it. Confidence is waning amongst the speculators and waxing amongst the commercials.
So, we have another week, and another dive in the $US while Gold "runs on the spot" in $US terms and so do Gold stocks. U.S. stock markets are up, but with the Dollar slumping, for how much longer? On the financial side, the Treasury has once again reached their "debt limit" - as of May 16. More "Rubin-esque" finagles are in the pipeline to allow the government to go on spending, for a few more weeks.
The Gold bull market remains perfectly intact, but Gold isn't going anywhere, for the moment. Stay tuned.