Here's the same chart updated to the present.
As you can see, both from the data immediately above and from the chart above that, it was a VERY quiet week for Gold in $US terms (and in terms of most other currencies for that matter) this week. On the chart above, for example, the Gold price has spent the entire week tightwalking along the line which shows the level at which it began the year.
Please note also on the chart that since Gold came off the $US 456 bull market high it set in early December last year, there have been five (including the present one) attempts to consolidate above the $US 440 level. The first four failed, the fifth one is now in progress.
We have been pointing to the HUGE significance of the $US 440 level ever since Gold first breached it in November 2004. For the reason WHY $US 440 is so significant, take a look at the chart below. This is a $US 5 x 3 point and figure chart, the most "senior" of the charts we have on $US Gold and therefore the most significant for LONG-TERM trends.
The chart shows Gold's position on November 16, 2004, the day that the spot future price broke above the $US 440 level for the first time in its post 2001 bull market.
Here's the same chart updated to the present.
Please note the double top established at the $US 425 level in early 2004. From there, you can see that there is a genuine correction which brought the price back to $US 375 (in late May). After that, Gold regained the $US 400 level by late June and was back challenging its $US 425 highs by late October. Then, in November 2004, Gold broke through the double top and went on to challenge and then surpass the $US 440 level in mid November on the way to its 2004 high of $US 456 set on December 3.
When Gold's spot future closing price hit $US 440 on November 16, 2004, the price on the chart had climbed three clear "X"s ABOVE its previous $US 425 (double top) high. That, plus the correction which had occurred in the meantime, allowed us to draw in a geniune LONG-TERM uptrend line on this chart. That uptrend line was the final and unmistakeable signal that $US Gold was definitely in a LONG TERM bull market.
Since Gold came off its $US 456 high last December, it has tried to break back above that $US 440 level four times and failed. You can see that on the daily bar chart at the top of this article. For a little over two weeks now, it has been making a fifth attempt. Since August 11, Gold has been as high as $US 446.10 and as low as $US 437.20. The VITAL $US 440 level is once again being challenged, but has not yet been breached.
On the bottom of Gold's 2005 trading range so far, the price has only dipped below the $US 420 level once - for just over a week in early February when the spot close got as low as $US 412.60. For almost the entire year, Gold has been trading between $US 420 and $US 445. For most of the year, the range has been between the earlier mentioned 2004 double top at $US 425 and the "bull market confirmation" $US 440 level on the $US 5 x 3 point and figure chart. And please remember, for most of the year Gold has been maintaining this very tight trading range in the face of a RISING (not falling as it did in 2002-04) US Dollar.
If ever any more proof was needed that Gold is indeed "the political metal", its $US price action thus far in 2005 has provided it. The more fraught the political (and of course economic and financial) the situation in the US becomes, the tighter the range in which Gold trades. Politically, the depth of the "approval ratings" now darkening Mr Bush's door in Crawford are now as low or lower than the ratings which led to President Johnson's decision not to contest the 1968 election. The cause is the same, the awakening by a significant portion of the American people that the US was mired in an unwinnable war entered into on a series of concocted pretexts.
On the financial front, the similarities are also striking. In 1968, the US was teetering on the brink of the end of a two decade period of strong economic growth and stable consumer prices. 1968 was the year when the first great attempt at concerted Central Bank Gold "fixing" broke down with the demise of the London Gold pool. It was the year when official debate began in earnest as to the advisability of ending Dollar - Gold convertibility altogether, a debate which reached reality three years later when President Nixon closed the "Gold window" in 1971.
Today, the US and the world is teetering on the brink of final payment being demanded for the steps taken between 1968 and 1971. The fiat currency era with no currency redeemable in anything which began in March 1973 "celebrated" its twenty-second anniversary last March. It is not likely to celebrate many (if any) more as it is presently constituted - with the US Dollar the sole official global reserve currency.
As the end of the US "summer doldrums" approaches, the situation is reaching a peak. The yield curve on US Treasury debt paper is flattening by the day. On August 26, the spread between two and ten year Treasury yields was only 12 basis points (0.12%). Two years ago, it was 2.76%. By way of comparison, the same yield spread in the UK and Australia is 5 basis points (0.05%). The only difference is that long-term yields are BELOW the official "bank rate" in both the UK and Australia. They are not yet below the equivalent Fed Funds rate (now 3.50%) in the US. Of ALL economic indicators, the single most infallible signal of a coming recession is an inverted yield curve. The US is right on the brink.
Finally, there is price inflation, best illustrated by the skyrocketing cost of gas (petrol). Americans (and Aussies) have been raising ever louder howls of woe about the cost of filling up for months. But now, they are taking action. They are doing the one thing above all others most feared by the economy runners. They are cutting down on borrowing - and spending.
The entire financial and economic system in the English-speaking world in general and the US in particular is fuelled by borrowing and spending. In the US, 65-75% of what is called economic "growth" comes directly from consumer spending. With no savings and with incomes inadequate to support lifestyles, most of that spending is done with BORROWED money. But now, with goods prices rising everywhere one looks and with asset prices against which one can borrow stagnant at best, the jig is almost up.
The LAST refuge of those who choose to see the US as having a "robust" economy is in the simple fact that Gold is stagnant. Consumer prices are soaring. The cost of living is soaring. The housing bubble is running on fumes. US stock markets are sagging slowly but surely. The US job market has reached the point where huge numbers of people are lining up to try for jobs at Wal Mart. The last piece in the puzzle remains to be fitted. That is a Gold price which begins to act in congruence with the REAL state of financial and economic affairs.
And since the LAST thing that the "powers that be" want is for the "peons" to start looking at the REAL state of financial and economic affairs (although how they can continue to ignore them is beyond us), the LAST thing they want is a Gold breakout. For most of the summer doldrum period, they have managed to keep everything, including the Gold price, on a fairly even keel. Now, the ship of state is listing and the summer doldrum period is almost over. We look forward to a VERY interesting northern Autumn (and southern Spring). Stay tuned.
