On Friday, February 12, Mr Obama officially increased his Treasury's borrowing limit by $US 1.9 TRILLION to $US 14.294 TRILLION. Monday, February 15 was a holiday on US markets. On the next day, $US Gold had its biggest one-day rise since November last year (when it was on its way to $US 1200 plus). On February 16, Gold jumped $US 29.80 while the trade-weighted US Dollar index - the USDX - fell back below the vital 80.00 level.
All hands to the pumps! On February 17, the IMF announced the sale of another 191 Tonnes (6.14 million troy oz) of Gold. You will probably remember that a previous sale of a bit more than 200 Tonnes was snapped up almost in its entirety by the Indian central bank. This time, the sale is to be on the "open market" according to the IMF. The Gold price momentarily faltered on this news, falling just below the $US 1100 level in late Asian - early European trade. But by the close of trade in New York on the day, the spot future price was actually up by $US 0.30. Meanwhile, the USDX recovered all its losses of the previous day, and a little bit more.
Then, on February 18, the Fed announced that it was going to RAISE INTEREST RATES. Yes, the interest rate it proposed to raise was only the discount rate, which is an anachronism that US banks almost never make use of anymore. Nonetheless, speculation reached fever pitch that this was a first sign of the end of "stimulus" in the US.
Finally, on February 19, the US Commerce Department announced that in January, US "Core" (minus food and energy prices) CPI had fallen for the first time since December 1982. Nobody saw fit to mention the data which showed that in December 2009, US bank lending fell by the most on record in a month. This revalation that "inflation" was well under control calmed dark fears that the Fed would be raising any interest rates which matter in the foreseeable future.
All in all, as dark fears about sovereign debt mount, Gold is doing exactly what it would be expected to do. This week has been a VERY good week for Gold prices in all major currencies, including the US Dollar. In the two weeks since its recent lows of $US 1052 set on February 5, Gold has retraced nearly half of its fall from the $US 1218 all time high it set on December 3 last year.
Since that all time high, the US Treasury has seen its debt "limit" increased by almost $US 2.3 TRILLION. US Treasury Secretary Geithner has assured his fellow Americans that the debt paper he prints will NEVER lose its AAA status. By contrast, Greece has had its sovereign debt downgraded with the predictable result that the entire monetary experiment of the European Union and the Euro is being called into question.
Looking at "seasonalities" going back decades, there is usually a $US Gold correction at this time of year, lasting from late January until mid/late March. Of course, times have not been "normal" since the beginning of the GFC well over two years ago now so those seasonalities have been weaker than the historical norm. In 2009, the $US Gold price hit a high in February which it did not exceed until early October. In 2008, $US Gold went almost straight up from the beginning of the year until Mid March. In this move, the highs were set early - in December 2009. By historical "norms", Gold usually languishes until about mid March and then spurts higher until mid May. It will be interesting to see if we revert to the "norm" this year. And if we do, whether Gold will exceed its December 2009 highs more quickly than was the case with the two previous corrections.
(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 2008. 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 in 2008.
By February 20, 2009, Gold had made it all the way back to the $US 1000 level. But it did NOT break through the $US 1000 barrier. Instead, what was traced out on this chart was the right shoulder of a gigantic "reverse" head and shoulders formation. Then Gold made it back to $US 1000 and on September 16, 2009, closed at $US 1020.20. That broke decisively above the $US 1000 "double top" on this chart and revalidated the entire bull market - from the bottom. In just over two months, from the end of September to early December 2009, Gold soared from $US 1000 to $US 1218. The subsequent and inevitable correction has seen the spot future closing price dip below $US 1100 twice, the second ocurrence came two weeks ago. Gold has now traded below $US 1100 since February 3.
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. As concerns about "sovereign risk" mount, Gold is starting to recover against a still strong US Dollar. This week, it has hit all time highs against the Euro and has risen strongly in every currency, including the US Dollar.
|
With the USDX remaining above the 80.00 level and briefly trading above 81.00 this week, the only currency in which Gold remains below its level in this table is now the Aussie Dollar Gold price. At current (February 19, 2010) exchange rates, it would take a Gold price of $US 1400.50 for the Aussie Gold price to equal the all time high it set on February 20, 2009.