As already stated ...the bottom is IN. What we need now is a confirmed uptrend. What is necessary for any uptrend to be confirmed is simple. The price must correct to a level HIGHER than its previous low, and must then go on to a HIGHER level than the one it reached in the move before the correction.
(Gold This Week - May 18)
Yep, we know that the quote above is "held over" from last week's commentary. Why not? It's just as relevant now as it was when it was first posted on May 18. And what a week. Up until June 8, spot future Gold prices were giving every indication of actually being "dead". Look at the data above, and while you're at it, look at the volume - or lack of same.
Of course, as you almost certainly know by now, Gold has awakened - AGAIN. On June 8, for no apparent reason (remember everyone scurrying around trying to find a reason for the Gold spurt on May 18?) spot future Gold climbed $US 7.40 in afternoon trading on the Comex, after the London market had closed for the week.
Take a look at the Gold chart. Isn't it pretty? Six days of an almost absolute "freeze" and then that lovely poke on Friday. Also, look at the moving averages on the chart. Note that the closing price is once again above all of them. Note even more carefully that the 50-day MA is almost certain to go above the 200-day MA next week. The last time that the 50-day MA was above the 200-day MA was in early May 2000 - over a year ago.
Also, look at the spike in open interest. Open interest didn't peak with Gold's big rise of May 18-21, it peaked with Gold big subsequent fall. Now, all the shorts which piled in to get the Gold price under control again have left. Well, maybe not all of them. The reports on Comex trading on June 8 state that a lot of shorts were taken out when Gold broke back above the $US 270 level. You can see on the data above that while volume was up considerably on the day, the open interest totals hardly moved.
So, having "disappointed" everyone (well, most people who read these commentaries, anyway 
) with the correction from the May 18/21 spurt, Gold is shaping up for another one. And just like the one three weeks ago, most people won't believe this one either. It's hard to blame them, there have been quite a few "false alarms" over the past two years or so.
The term "bubble" is a useful one in financial analysis, referring as it does to any market which has seen prices blown up to disproportionate levels. But, in this context, what is the opposite of a "bubble"? We don't know of a convenient word to use, but if one wants to describe the present $US Gold "price", that is what we are seeing. How about an "elbbub"? Kinda catchy - don't you think?
A "bubble" has nowhere to go but DOWN. An "elbbub" has nowhere to go but UP.
The chart of $US Gold is above. Here are the charts of Gold in the other currencies we cover.
Gold in Yen
Gold in Euros
Gold in D-Marks
Gold in Aussie Dollars
At the risk of repeating ourselves, please remember several things about the current situation for Gold. There was an obvious reason for the Gold spurt in late 1999, that was the announcement of the "Washington Agreement" by the European banks. There was a obvious reason for the Gold spurt of February 2000. That was the announcement by Placer Dome that it was curtailing its hedging activities. There was NO obvious reason for the Gold spurt of May 18, 2001. Nor was there an obvious reason for the spurt of June 8, 2001.
The 1999 and 2000 spurts came at the BEGINNING of what has proved to be a two year "bottom formation" in $US Gold. These spurts come at what is looking more and more like the END of that bottom formation.
Mr Greenspan announced that "inflation" was not a problem days after the May 18 Gold spurt - AFTER Gold had been shorted back to the mid $US 260s. Mr Greenspan repeated himself on Monday, June 4. Oops! Four days later, Gold broke out of that consolidation range in the mid $US 260s.
The $US index hit a post-1986 high of 119.42 on Wednesday, June 6. It will continue to "defy gravity" for precisely as long as Mr Greenspan and the Fed retain their "credibility". The Fed's credibility remains intact on Wall Street and amongst the big investment houses, who cannot afford to doubt them. But it is getting pretty tattered on Main Street U.S.A., where no one is seeing any signs of an economic turnaround - just the opposite.
We have now had a second $US Gold spurt in three weeks, both of them having no obvious impetus behind them. Gold was savagely sold off after the first spurt on May 18, but it did NOT return to its previous starting point. It formed a solid base for a week, and now it is moving UP - again.
There is no "obvious" reason for this. To find one takes a bit of thought. But when one considers the REAL state of the U.S. economy - see the upcoming issue of The Privateer (published on June 10)for more on THAT - the reason is clear enough. The U.S. economy is in BAD shape. U.S. debts, both internally and externally, are HUGE. The money-pumping excesses of the Fed are common knowledge, and are starting to worry even the most rabid advocates of "growth".
At some point the Gold elbbub has to end. The first step in that process was always to bring Gold back onto the radar screens of world (and especially U.S.) investors. That is now in the process of happening. The ultimate step, however, will NOT come until those who are intent on keeping the price in check are seen to be in retreat (a la the end of the London Gold Pool of the 1960s and the IMF/Treasury auctions of the 1970s). That won't come this side of $US 300 Gold.
If you are cautious, wait for $US 300. If you are a bit more adventurous, well, each of these Gold "spurts" could be THE ONE. There's little if any risk in holding physical Gold. And the risk of holding Gold stocks is diminishing steadily. Stay tuned.
