Gold can now turn down on the $US 5 x 3 point and figure chart while remaining ABOVE the $US 1000 level. And even if the spot future close goes back below $US 1000 - as it very well may - the decisive new high is enought to re-validate the entire $US Gold bull market going back to the twin bottoms of 1999 - 2001 just above the $US 250 level. Yep, that's right, the $US Gold price has QUADRUPLED since 2001.
In the 1970s, Gold moved up in two big jumps. The first took place between August 1971 and December 1974 when Gold rose from $US 35 to $US 195 or a little over 5.5 times. Then, between December 1974 and August 1976, Gold gave up almost 60 percent of those gains, falling back to $US 102. The second jump saw Gold move from $US 102 to $US 850 in January 1980, a rise of a bit more than 8 fold.
Over the next two decades, Gold never even managed to double in $US terms. The biggest move in that entire period took place between February 1985 and December 1987 when Gold rose from $US 282 to $US 500. That's a rise of a "paltry" 77 percent. Interestingly enough that period saw many rises in the price of Gold stocks of 10-20-30-40 fold. These type of rises were, of course, also seen in the 1970s. We have seen nothing remotely similar at any time in Gold's bull market since 2001.
The most interesting aspect of Gold's breach of $US 1000 is that it comes not much more than a week before the Heads of State are due to meet at the G20 meeting in Pittsburgh to give their "seal of approval" to the much touted financial AND economic recovery from "the worst 'recession' since the 1930s." In "normal" times, this $US Gold price surge simply would not have been allowed to happen. But these are anything but "normal" times.
If you are content to have your government take care of your financial future, then the Gold price is, or should be, reasonably irrelevant to you. If you are NOT content, then it should be of the HIGHEST interest. That is especially true if you are not buying Gold with $US Dollars. In terms of many other major currencies, Gold has hardly moved in price this week and remains WELL below its highs of earlier this year.
But we would have thought that any Privateer subscriber or reader of this page, especially any of our longer-term readers, would have already established a position. Well, the most important Gold price - the $US Gold price - has just revalidated its bull market. That means that it is going to go a LOT higher, especially in $US terms. How high? We have no idea. But no matter how high the $US price of Gold goes, the metal will not REALLY come into its own unless and until it regains its historical role as MONEY. That didn't happen at the end of $US Gold's last bull run in 1979-80. But it took US interest rates above 20 percent to lure people back into $US Dollars and other paper currencies.
It will happen this time. For one reason amongst many others, global government debt levels mean that interest rates of even a fraction of those which held sway at the end of the 1970s would literally "kill" modern fiat currencies. The re-emergence of Gold as money well almost certainly not BEGIN in the US, but it will begin somewhere. Don't forget, the Chinese are now urging their citizens to buy and hold PHYSICAL Gold. Inscrutable? We don't think so.
(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 the $US 1000 level. But it did NOT break through the $US 1000 barrier. Until this week, what had been traced out on this chart is the right shoulder of a gigantic "reverse" head and shoulders formation. But on September 16, spot future Gold CLOSED at $US 1020.20. That breaks decisively above the $US 1000 "double top" on this chart and revalidates the entire bull market - from the bottom.
In February 2009, spot future Gold closed above the $US 1000 level for the second time. While the close did not quite equal that of March 2008 in $US terms, it set new all time highs in terms of many other currencies - the Yen being an exception. That was because of the recovery of the US Dollar which had taken place since March 2008.
On September 11, 2009, spot future Gold closed above the $US 1000 level for the third time. But this time, Gold did not get anywhere near its February 2009 highs in terms of the Aussie Dollar or the Euro and remained below it in terms of the Yen. Here's the record.
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Take a look at the percentages by which three "other" currencies remain below their levels of February this year. To take the most "extreme" example, at current (September 18, 2009) exchange rates, it would take a Gold price of $US 1364.80 for the Aussie Gold price to equal the all time high it set on February 20, 2009.