As you know - it did. On September 24, the day that the Heads of State G-20 meeting in Pittsbugh began, spot future gold fell $US 15.50 to close back "safely" below the $US 1000 level at $US 998.90. The US Dollar, which has been steadily falling for weeks, staged a big turnaround on the day too with the trade-weighted index - the USDX - bouncing nearly a full point from a 52-week low of 76.29 to 77.11 on the day
On September 25, Gold retreated another $US 7.30 to close the week at $US 991.60. That fall led to a downturn on our senior $US 5 x 5 point and figure chart - see below.
The assembled Heads of State most certainly did give their "seal of approval" to the much vaunted recovery. We have before us nine closely typewritten pages which are the statement released at the end of the meeting. The White House distributed this widely via email. We have not yet had a chance to read the entire statement - a thankless but necessary task - but the preamble did jump out at us. Here's the relevant passage:
How has it "worked"? Well, in the fiscal year which ends this week, the US federal government will have borrowed FOUR TIMES as much money as they did last year, which was a record at the time. At about $US 1.8 TRILLION, fiscal 2009 borrowing will be the equivalent to what the US borrowed in the almost 200 years between 1787 and 1985. Federal government borrowing in the ONE YEAR of fiscal 2009 is almost TEN TIMES what the government borrowed to fight WWII. And they plan to go right on borrowing - at ZERO rates of interest - for the "foreseeable future".
These plans are duplicated to a greater or lesser extent right across much of the G20 nations, especially the English speaking ones. Such a course of action is an absurdity. It absolutely guarantees the progressive destruction of the currencies of ALL the nations engaged in such economic lunacy.
But so far, "it's worked". Banks which rely totally on government funding and/or guarantees are still functioning. The avenues by which new credit is generated and disbursed are still open. The major banks themselves, all of which are officially too big to fail (in this government ACTIONS speak much louder than words) are happily recycling the flow of credit from government back into the financial markets - notably global stock markets. Hence the six month and counting rally from the March 2009 lows.
And Gold, after having "trespassed" above the $US 1000 barrier on a spot future closing level for nine straight days between September 11 - 23, is once back at a three figure $US price. Note the huge volume in the weekly table above on September 24.
As we said here last week, the close of $US 1020.20 on September 16 was four clear "Xs" above the twin spot future closing highs of March 2008-February 2009 on both the $US 5 x 3 and $US 5 x 5 point and figure charts. This was enough to re-validate the entire $US Gold bull market. The fact that Gold still languishes so far below the highs it set early this year in terms of other major currencies (see below) emphasises two things. One is obvious and concerns the BIG fall of the US Dollar since February. The other simply makes clear the fact that even at levels slightly above or below $US 1000 - Gold is still vastly undervalued in terms of the tremendous damage which has been done to ALL global paper currencies to "fight" this recession.
As long as the US Dollar remains the world's reserve currency, the $US Gold price will remain the most important indicator of the "health" (or otherwise) of a global fiat paper system underpinned by the US Dollar. As long as Gold exists as a potential alternative form of MONEY, its "price" in terms of US Dollars will be "public enemy number one" of those who are striving to perpetuate the global fiat money system. The sudden dive of the $US Gold price in perfect conjunction with the G20 Heads of State meeting is merely the latest illustration of that fact.
(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. This week, we have had the downturn on the chart. MAJOR support now lies at the uptrend line - presently at the two major uptrend lines.
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 1360.10 for the Aussie Gold price to equal the all time high it set on February 20, 2009.