Over the first week of January, the $US Gold price was up 4.0 percent. That surge continued at the start of this week as Gold poked above $US 1150 on Monday - January 11. But then on January 12 came the announcement from China that they were increasing the reserve requirements in their banking system and setting in place various other methods to, they hope, rein in their out of control credit creation.
This was instantly seen as a potential loss of demand for "commodities" (including precious metals of course) and Gold slumped $US 22.00 on the day
Having gotten much of that back as the week progressed, Gold came off again on Friday in Asian and European trading as the US Dollar staged a remarkable turnaround and ended up $US 12.50 down on the day in New York. Over the week, Gold lost $US 8.40.
What was in place to push Gold higher in the first month of 2009 is still in place, and has intensified, as we begin 2010. The December 2009 US federal budget deficit has just been announced. It was twice as big as the deficit was in December 2008. The US trade deficit is once again increasing in spite of the low US Dollar and faltering demand for imported consumer goods by Americans. Sovereign debt crises are bubbling under in Iceland, Greece, Spain, Portugal, Italy and most intensively Japan. The mainstream financial press is not yet talking about the state of state finances in the US, even though they are nearly as bad as the nations where the ratings agencies have recently been "active".
Mr Obama has suddenly shifted position and is off to Massachusetts this weekend to lend his weight to the faltering campaign of the Democrat Senate Candidate there. This is seen to be risky, but necessary, since the loss of ONE Senate seat would take the Democratic party below the vital "60". Several recent Senate votes have squeaked through on this number. The loss of Massachusetts would deal a likely fatal blow to Mr Obama's health care plan and would put other pieces of legislation under grave threat.
Not least of these is the imminent Senate debate/vote on the raising of the US debt ceiling. The ceiling was lifted by a paltry $US 290 Billion (to $US 12.394 TRILLION) at the end of December and will have to be lifted again - by MUCH more than that, before the end of February.
Right now, the financial world is still clinging to the vision, developed so assiduously over the last nine months of 2009 after stock markets bottomed in mid March, that the GFC is over. The US government is still on their end of year break with the Senate not due to grind back into gear until next Tuesday (January 19). When they do, the stage is set for all hell (financially speaking) to break loose at any time.
(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. The correction over the month of December 2009 gave just over half of those gains back. And over the first week of 2010, the chart above turned UP again.
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 and rose more than $US 200 almost straight up before the December 4 correction. Now, in mid January 2010, Gold is marking time in the low - mid $US 1100 range.
|
Gold priced in Japanese Yen has joined $US Gold in the plus column. After getting into the plus column as the $US Gold price peaked, the Euro Gold price has slipped back into the "red" since early December. The most "extreme" example remains the Aussie Dollar Gold price. at current (January 8, 2010) exchange rates, it would take a Gold price of $US 1452.90 for the Aussie Gold price to equal the all time high it set on February 20, 2009.