There have been two big "down" days on Comex Gold over the last two weeks. On Wednesday, June 5, the spot future Gold close fell $US 6.60 to 321.20. On Monday, June 10 it fell $US 5.90 to $US 318.70. Spot future Gold closed on June 14 at $US 319.10 - down $US 5.50 on the week and Gold's first weekly close below $US 320 since May 17.
Here is a genuine technical "correction", as you can see on all the charts to the left. On the daily bar chart, Gold is now below both its moving averages (10 and 20 day) and almost back to the $US 300 plus trendline. On the weekly chart, Gold has turned down into the lower 1/3 of its 2002 uptrend. And on the point and figure chart, Gold has simply turned down - with no "damage" whatsoever having been done to this chart.
Has Gold gone down for "genuine investment reasons"? Well, it did close at five year highs as recently as June 4, not quite two weeks ago. That's a long time between "drinks" for people who bought Gold in 1997 and have been waiting all this time to get out "even". It doesn't matter what the investment is, a break of multi-year highs will always generate selling from precisely this type of holder.
On top of that, Gold open interest is down almost 20000 contracts over the past two weeks. On May 28, total open interest was 190,444 contracts. On June 11 (the most recent report), open interest was down to 171,746 contracts. The most interesting part of the Commitments of Traders report for the week to June 11 was the fact that while Gold was falling below $US 320, the "Commercials" increased by longs by 3569 contracts and decreased their shorts by 4468 contracts. The "Commercial" long/short ratio is 1:2.75. For the "Speculators" it is 3.14:1. For both categories, long contracts decreased by only 1265 while short contracts were down by 13819 - more than ten times as much.
So, Gold is taking a "breather" while the bottom continues to fall out of the paper investment markets. The $US index set a new 2002 low of 110.80 on June 14. On the same day, the Dow plummeted 241 points in the first half hour of trading before getting almost all of it back to close down 28 at 9474. That is yet another 2002 low.
Please scroll up to the top of this analysis and click on the link labelled "Monthly bar chart back to 1975". In May, Gold broke ABOVE the trendline connecting the all time high of January 1980 and the last bull market high set in February 1996. In other words - GOLD BROKE ABOVE A TWENTY-TWO YEAR TRENDLINE! You can BET that the financial powers that be noticed that.
(The Gold Bull Market - June 7)
Click the link again. You can see that Comex Gold has retraced and now sits right on top of that trendline. Gold was never going to break through a twenty-two year trendline without a struggle. We have seen the fist signs of that over the past two weeks. Gold has just hit a five-year high and broke above a LONG-TERM trendline. Anything but a correction would have been both a great surprise and a potentially dangerous development.
So, we wait and see what happens next. You can see all the Comex Gold trendlines on the charts on this page. You can see the longer term ones in the "Weekly bar chart back to 1996" and the 'Monthly bar chart back to 1975" links at the top of this page. All these trendlines point UP. All these trendlines are intact. The longer term trendlines have not even been remotely threatened. Gold is still climbing a "wall of worry", and in any new bull market, that's exactly the way it should be and almost always is.
The resistance level on spot future Comex Gold is now fairly obvious - it's $US 330. Support is around $US 315 and below that, around $US 310-312. And of course, ultimate support is at the level that was the Gold "ceiling" from late 1997 until the end of March this year - $US 300.