Picture this, if you can. Hordes of Wall Street "Analysts" all unanimously yelling that what was happening on the Dow was a "false rally", that it was merely "short covering", that gravity would soon re-assert itself and U.S. stock markets would fall back again. Try and picture this type of outburst against ANY financial asset traded on U.S. markets. Can't? We can't either.
Yet that is precisely what we have been hearing from all sides for most of this week in regard to GOLD. No sooner did the pesky stuff have the temerity to spike $US 10 in three days at the end of February, than the chorus began. No, not from "Wall Street Analysts", they don't bother with Gold. This was a chorus from that small band of "Gold Analysts" who actually manage to get on TV in the U.S..
Yes, we know it's predictable. Yes, we know it's wearing. Yes, we know that once again, it seems to have "worked". But we are not at all sure that it is going to go on working for very much longer.
Would the last person who thinks that the U.S. economy isn't ALREADY in recession (or worse) please turn out the lights. The piling up of data is approaching mind-boggling proportions. The stay of execution given SOME (primarily the Dow) U.S. market indices by Wayne Angell's "educated guess" about the Fed's intentions for U.S. rates is not going to work much longer. Even Mr Greenspan himself has now come out (on March 2) and stated that his intention is to "keep the markets guessing". About the only guess that we still have about the U.S. markets is how long the Dow is going to be able to keep its head against the 10000 level
One thing we are perfectly certain about is that once the Dow breaks below 10000 - and stays there - the "fat lady" is going to raise the roof.
The term "bubble" is a useful one in financial analysis, referring as it does to any market which has seen prices blown up to disproportionate levels. But, in this context, what is the opposite of a "bubble"? We don't know of a convenient word to use, but if one wants to describe the present $US Gold "price", that is what we are seeing. How about an "elbbub"? Kinda catchy - don't you think?
This week, the Gold "corpse" pushed the lid off its coffin, sat up, and looked around. No sooner had it done so than Gold's "caretakers" whacked it on the head and started looking frantically around for nails so that they could secure the lid on the coffin again.
Judging by the chart above, Gold's "spike" this week was the healthiest since the one that took place way back in early June 2000. On the daily chart, Gold has happily gone above BOTH the moving averages - for the first time this year - and has shown that it is going to be difficult indeed to force the price below the 1999 lows which Gold approached two weeks ago.
Here is Gold in the other currencies which we cover
Gold in Yen
Gold in Euros
Gold in D-Marks
Gold in Aussie Dollars
Hmmm. Gold is threatening to establish a geniune uptrend in Yen terms. And look at Japan. They have lowered their interest rates back to zero. The Nikkei fell almost 1000 points this week to levels not seen since mid 1985. The Yen itself is threatening the 120 Yen to the Dollar level. And the Japanese government is in what looks like terminal disarray.
In the U.S., rate cuts are supposed to rescue stock markets and economies, not give a Central Banker a few days of reprieve during which he can strive to "keep the markets guessing". Problem is, fewer and fewer people are game to go on guessing. In February, a record $US 13 Billion was pulled out of stock market mutual funds.
And, in the midst of all this, the $US Gold price has suddenly awakened. We don't think it is going to be possible to put it back to sleep again. First, though, it would be nice to see Gold turn up again before it slips back below the $US 260 level. After that, the first challenge is to get above $US 270. If Gold manages that, we will have solid evidence that the air is starting to leak back into the Gold "elbbub".
