This week, the US Dollar recovered slightly, and Gold climbed into the mid $US 320s, closing at $US 324.70 on November 12, before falling out of bed on the announcement that Saddam would "comply" with the latest UN resolution on November 13.
In this context, it is interesting to look at the Commitment of Traders report. The report comes out on Friday and gives the positions for the previous Tuesday, in this case, November 12, the day when Gold hit $US 324.70, its high close for the week. Note the two figures that stand out like sore thumbs. Over the week to November 12, the speculators increased their LONG positions by 18725 contracs while the "Commercials" (the BIG players) increased their SHORT positions by 21145 contracts.
On November 13, spot future Gold fell $US 5.80 (looks like the Commercials were "right" again) to $US 318.90. But by the end of the week, aided by a US October PPI of +1.1% (expectations were for a +0.2% figure), Gold was back above the $US 320 level, closing at $US 320.90. For the week, the spot future Gold price fell $US 0.80.
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 November 8 at $US 337.30.
You can see here that the "projected" Gold price, if Gold had proportionally reacted to $US weakness since March 27, it would have broken away from the $US 330 level by now. $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:
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On the daily bar chart, the $US 5.50 fall on November 13-14 pushed the chart back to its longer-term (20 day) moving average. As you can see, by the end of the week Gold was back above both MAs. On the weekly bar chart, Gold remains comfortably above both (10 and 20 week) moving averages with the uptrend perfectly intact. The point and figure chart shows yet another downturn in Gold's five month struggle to break out above its June 4 2002 high of $Us 327.80.
And finally, here's one final perspective, comparing Gold's 2002 high closing level set on June 4 with its level today.
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Gold's loss since its June 4 2002 high is 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 5.37% ABOVE its June 4 level of $US 327.80. That would put Gold at $US 345.40.
On November 14, Argentina "missed" a due payment to the World Bank. The White House duly noted that conditions in Argentina had "improved". On November 15, the October US PPI rose five times as much as it had been expected to rise. There is no prospect of "inflation", the economists chorused.
Let us put it this way. It is easier to get away with such claptrap when Gold is NOT "signalling inflation". And Gold won't "signal inflation" as long as it remains below $US 330. Inflation there most certainly is, as a cursory glance at US money supply numbers, consumer borrowing, and Fed mandated interest rates make clear. But it isn't showing - yet.