Before the "dip" on November 27, Gold had reportedly enjoyed its best one month upwards run in 27 years. Friday was, of course, quite a day. You have undoubtedly already heard about the Dubai situation - which we will be covering in some detail in the Late November issue of The Privateer (published on November 29). The day's trading range (taking into account Asian and European Gold trading too) was more than $US 60 with Gold closing $US 42 above its intraday lows and down just under $US 13 from the all time highs it had set in US trading on November 25.
As was obvious on the day, investors were thoroughly spooked by Dubai asking for a delay in paying about $US 80 Billion worth of debt. Down went the markets - notably in Asia - which had been the prime beneficiaries of the $US carry trade. Up went the Dollar as these carry trades were unwound. Gold initially sold off in a knee jerk reaction as it always does when these situation hit "out of the blue". Given the fact that this was trade going into a weekend, the bounce back from the intraday lows was very impressive.
The other item this week is that the US Mint ran out of one ounce "Eagle" bullion Gold coins this week, the second time this has happened in a bit more than a year. The supply simply could not keep up with the demand.
At its $US 1187 close on November 25, the $US Gold price had soared to a point where it was more than $US 110 above its 10-week moving average and more than $US 150 above its 20-week MA. These "gaps" are very large and a correction was in the cards. At its low for the day on November 27 in the US, Gold was more than $US 60 below where it had been just before the Dubai announcement hit. We will say it again, what was surprising was not this sharp correction, it was the fact that by the close of trading in the US, Gold had got at least two-thirds of it back.
And finally, the fact that Gold DID correct is a very good indicator that we are as yet a long way from seeing Gold really taken seriously by the mass of "investors" as a genuine alternative to paper assets. If that had been the case, Gold would not have gone down on the Dubai news, it would have soared higher. Even with the gains of the last two months, Gold is still not on the radar screens of the vast majority of investors.
Continuing our tables from last week, you can see that Gold is still going up against ALL major currencies, not just the US Dollar. Here's the record over the past two weeks:
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Gold's last close below $US 1000 was on September 29. It broke above its March 2008 spot closing highs decisively on October 5. And since Gold first closed above the $US 1100 level on November 9, it has only had two "down" days. Gold has been setting all time highs for most of the past six weeks in $US terms.
Gold is not yet setting all time highs against any of the other currencies in the table above. It is getting very close in Euro terms, but it is not there yet. The really interesting thing about this table is the performance of Gold in terms of the Australian Dollar over the past two weeks. The Aussie Dollar is one of the most favoured currencies at the other end of the US Dollar carry trade. It has soared against the US Dollar since last March. As a result, the Aussie Dollar Gold price has been lagging badly - until mid November.
Now, let's look a little bit further back. Here is the record since Gold decisively settled above all its previous highs in $US terms on October 5:
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(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. Late in September, had the downturn on the chart, only to see Gold burst above its September 16 high to put the final re-validation on the entire $US bull market in early October. And this week, Gold has risen to just short of $US 1190.
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. It has remained above the $US 1000 level continually since the end of September.
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Gold priced in Japanese Yen has joined $US Gold in the plus column since February 20. And now, the Euro is very close. The most "extreme" example remains the Aussie Dollar Gold price. at current (November 20, 2009) exchange rates, it would take a Gold price of $US 1411.40 for the Aussie Gold price to equal the all time high it set on February 20, 2009.