As you can see on all these charts, the upturn has come yet again on $US Gold. This week, the strength in the $US Gold price has mirrored the weakness in the $US, which has in turn been caused by a growing certainty inside and outside the US that the Fed will cut rates when their FOMC convenes on November 6.
For a month, the $US index hardly moved. It closed on September 26 at 108.15, and a month later, on October 25, it closed at 108.17. This week, the $US index lost almost 2.00 points to close at 106.25 - its lowest level since September 5.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 on March 27:
|
If Gold's gain had exactly mirrored the loss on the $US index since March 27, Gold would have closed on October 25 at $US 335.50.
You can see here that the "projected" Gold price, if Gold had proportionally reacted to $US weakness since March 27, has broken away from the $US 330 level. $US 330 is, of course, the "glass ceiling" which has been in place on the $US Gold price ever since it hit its 2002 high ($US 327.80 spot future basis) on June 4.
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:
|
On the daily bar chart, Gold has surged back above both its moving averages and the shorter-term (10-day) MA is quickly catching up with the longer-term (20-day) MA> The shorter-term (1average has been below the longer-term one since October 10, the day after US stock markets hit their 2002 lows and embarked on the rally leading up to the November 5 mid-term elections. On the weekly bar chart, Gold has bounced off its longer-term (20 week) moving average this week, just as it did at the bottom of its last correction in late July. On the point and figure chart, Gold is now correcting from the third down "spike" since last June. Note the line connecting these "spikes" and that each has bottomed higher than the previous one.
And finally, here's one final perspective, comparing Gold's 2002 high closing level set on June 4 with its level today.
|
Gold's loss since its June 4 2002 high has come close to halving over the past week and is now considerably lower in percentage terms than the loss on the $US index over the same period. If the action on spot future $US Gold had "mirrored" the action on the $US index since June 4, then Gold would be 4.42% ABOVE its June 4 level of $US 327.80. That would put Gold at $US 342.30.
The $US ran on the spot for a month up to October 25. US stock markets have been rallying since October 9 but the rally is fast running out of steam. Now, the $US has broken downstairs, as expectations grow, due to the avalanche of bad economic data coming out of the US, that the Fed will lower rates next week for the first time since December 2001.
Treasury yields are discounting a rate cut, with both 3 and 6 month paper yielding 1.41% on November 1 - 34 basis points below the present fed funds rate of 1.75%. Wall Street is still trying to rally, ignoring the obvious fact that a Fed rate cut would give the outright lie to all the talk about economic "growth" and "recovery" which has been coming out of Mr Greenspan's mouth over the past six months or so. It's a fact: You can't fool all of people all of the time. So far, the $US is showing that as, to a lesser degree, is the $US Gold price. We'll see what happens after the elections, and the Fed meeting, have come and gone.