Just over three months ago, at the end of May, we headlined this commentary "Third Time Lucky". We've seen that headline popping up all over the "Gold community" on the internet in the last couple of days.
The reason for this is perfectly obvious, of course. Over September 2-3, the spot future price of Gold shot up $US 41.20 from $US 956.50 to $US 997.70. Yep, here we are back AT the $US 1000 level, a level which Gold was approaching - but did not reach - when we penned our headline three months ago.
So, we were early, by just over three months. Although Gold did get as high as a spot future close of $US 984 two trading days after we uploaded that particular commentary. Was there much "damage" done in the intervening three months? None at all now to holders of Gold. A great deal more to the global economy in the attempts to prop up the global financial system.
Two weeks ago, we pointed out that the 200-day (40 week) moving average on the US spot future Gold price had hit new all time highs, breaking above the $US 900 level for the first time ever. Last week, Gold bolted to the top of its (northern) summer long trading range. This week, Gold broke above that range and stopped just short of the ultimate $US 1000 ceiling.
Over that period, Gold has not been dragged up by soaring oil or commmodity prices. Nor has Gold been reacting to a fall in the US Dollar. Nor have there been any overt moves in US Treasury yields. No wars, no financial collapses, no bolts from the blue. There has been no particular evidence that global investors are gravitating towards what they consider to be either more or less risky investments. Stock markets are running on the spot.
This $US 40 plus upwards bolt on the $US Gold price - and an even bigger advance on the $US Silver price - has come all on its own. It is not even reflected in a big increase in the Gold held by the Gold Exchange Traded Funds (ETFs). This volume has hardly moved.
The $US 22.00 Gold surge on September 2 certainly was reflected in the performance of Gold stocks. In Australia, for example, the local Gold stock index bolted upward about 7.25 percent on the day, probably its biggest one-day upwards percentage move this year. We have seen hundreds of "explanations" of why Gold has suddenly chosen to bolt higher. Many of them are ridiculous but quite a few may be true. We will never know the precise reason.
We don't need to. Ten years ago, when Gold was bottoming, the US government was boasting a (spurious) budget surplus and the funded debt of the US Treasury was moving up by less than $US 20 Billion over a full fiscal year. Today, the US government is nearing the end of a fiscal year during which they will spend $US 3.5 TRILLION and borrow (according to the latest estimates) about $US 1.6 TRILLION of that. Every other nation in the world is on a similar trajectory.
At some point, this was always going to translate into a sudden and intense increase in the demand for an alternative form of wealth preservation. The Gold and Silver price spurt this week is another signal that this intensification of demand is imminent.
Spot future Gold didn't trade or close above the $US 1000 level this week. We won't know if this latest surge is "for real" unless and until it does. More to the point, Gold must get above $US 1000, and then correct while remaining above that level, and then go higher before we can be sure that what has been the ultimate price "ceiling" for Gold is now the price floor.
Don't forget, there is a G-20 Finance Ministers meeting going on this weekend in London to prepare for the Heads of State meeting coming up late this month in Pittsburgh. A soaring Gold price is NOT a part of the agenda that those meeting in London would feel very comfortable with.
Once again, the "enemy" (of governments and their banking and financial systems) is at the gates. Lets see if this time Gold can kick them down.
It has always been just a matter of - when.
(Chart appears here in original analysis)
A new low was hit on the chart when spot future Gold closed in New York at $US 705 on November 13 last year. This pushed the chart two "Xs" below the $US 715 support level established in late October and equalled early in November. Then came the first big turnaround - and upturn on the chart - of November 14. The region between $US 700-720 firmed as SOLID support for Gold. That support "zone" was emphatically confirmed as Gold rose by just over $US 110 between November 13 and November 28 last year.
On February 20, as you know, Gold made it all the way back to its previous all time highs. But it did NOT break through the $US 1000 barrier. Since then, Gold retreated to just below the $US 900 level in three moves down. What is being traced out on this chart is a gigantic "reverse" head and shoulders formation. The trading range between $US 900 and $US 1000 was broken early in April. Over the month of April, a tighter range between $US 870-910 was established. Then, Gold went straight up on this chart for six weeks - from the start of May until early June. Since then, the chart went been going sideways with the latest downturn - to below the $US 940 level - taking place on August 17. And now we have the upturn on this chart with Gold right back to its highs.
We began the table below in 2007 and have extended it into 2009, even though Gold in all four currencies in the table remain well above their 2006 highs. The all time highs for Gold which occurred in 2008 have remained intact in US Dollars and in Yen.
But in terms of the Euro and especially the Aussie Dollar, the situation is very different. Gold hit new all time highs in both currencies on January 30 with situation being duplicated by Gold in terms of MANY other currencies. On February 20, those highs were taken out when Gold hit $US 1000. They were not taken out when Gold hit $US 1000 again in May. Nor are they going to be taken out if Gold hits $US 1000 next week. When Gold's highs in terms of all major currencies ARE taken out, Gold is going to be quite a way above the $US 1000 level.
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