Last week, most Gold (and Gold stock) investors were still wondering whether $US 300 would hold and many of them were worrying that it wouldn't. As you can see on the weekly bar chart below, spot future Gold dipped briefly below $US 300 ($298 intraday) on August 1. Then there was the the $US 8.80 rise to $US 314.30 on August 7, followed by a $US 3.90 selloff to $US 310.40 on August 8, followed by a $US 3.80 rise to $US 314.20 on August 9.
Preliminary indications are that Gold's trading range may have narrowed by $US 10. Last week, it was $US 300-330. With the action over the past three days (August 7-9) Gold is developing a new support point of $US 310. YOu can see this on the daily Gold chart to the left.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 on March 27:
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If Gold's gain had exactly mirrored the loss on the $US index since March 27, Gold would have closed on August 9 at $US 328.85.
Significantly, Gold has staged its big turnaround since the IMF announced their $US 30 Billion bailout package for Brazil. The announcement of this package has been judged instrumental in rekindling buying on world stock markets this week, as well as acting as support under the U.S. Dollar. The main signal that all may NOT be well, however, is the sudden jump in the Gold price. Yes, the big move on August 7 was atrributed to an announcment by Barrick about curtailing their hedge programs. But we do not think it was a coincidence that the day after the Gold price jumped, the IMF announced their Brazilian bailout.
We don't think it was a coincidence that Gold fell back when the Brazilian bailout was announced on August 8 either. That makes the rebound on Friday (August 9) VERY interesting indeed. Remember, when Gold spiked $US 6.80 to $US 323.90 three weeks ago on July 19, the price was smashed all the way back to $US 300. Now, Gold has made a bigger spike, lost less than half that spike, and then gotten it all (bar $US 0.10) back the next day.
Here's another perspective - a comparison between Gold's 2002 low and its present price and the $US index 2002 high and its present "price". All data is on CLOSING levels:
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It is obvious ion both the weekly bar chart and the point and figure chart that buyers have all of a sudden come in almost $US 10 higher than they were coming in a week ago. On the weekly bar chart, Gold has rebounded from challenging its longer-term (40 week) moving average to climbing back above the shorter term (20 week) MA.
"On the weekly bar chart, Gold rebounded when it hit its longer-term (40 week) moving average at the $US 298 intraday low of August 1. It is now $US 9.00 higher than that low. On this chart, resistance is at the shorter-term (20 week) moving average (and the June lows) around the $US 310-312 level. On the point and figure chart - on CLOSING prices - you can see that Gold dipped just below the top of its post April 2001 upchannel and turned right there. On this chart too, resistance is about $US 310-312."
The Gold Bull Market - August 2
As you can see on the charts, what was a resistance level last week is well on the way to becoming a SUPPORT level this week.
And finally, here's one final perspective, comparing Gold's 2002 high set on June 4 with its level today.
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So far this year, Gold is still further above its 2002 low than the $US index is below its 2002 high. But as you can see from the table above, the story since Gold hit its 2002 high on June 4 is QUITE different. In the two months since June 4, $US Gold has fallen quite a bit further in percentage terms than has the $US index. Of course, almost all of Gold's fall came during the week of July 22-26. If the action on spot future $US Gold had "mirrored" the action on the $US index since June 4, then Gold would be 2.46% ABOVE its June 4 level of $US 327.80. That would put Gold at $US 335.87.