The five highest Comex spot future Gold closing prices for 2002 - so far - are as follows:
The five highest Comex spot future Gold intraday highs for 2002 - so far - are as follows:
By either of these above criteria, as you can see from the figures, $US Gold is once again "on the brink".
Finally, here are the two most "volatile" weeks of 2002 so far - based on spot closing prices:
February 4 - 8: Gold rose from $US 286 to $US 303.50 - up $US 17.50 or 6.12%
July 22 - 26: Gold fell from $US 323.90 to $US 303.30 - down $US 20.60 or -6.36%
By these 2002 "extremes" Gold put on a "middling" performance over the past week - December 2 - 6 - rising from $US 316.80 to $US 326.30. That's a rise of $US 9.50 or 3.00%.
Once again, with the intraday high of $US 328.00 on December 6, Gold is knocking its head against the VITAL $US 330 level. Just as $US 300 was the Gold ceiling between late 1997 and March 2002, $US 330 has been the ceiling ever since Gold first tried and failed to penetrate it back in late May/early June. The $US 330 ceiling has been in place for six months.
Now, with Gold once again on the verge, let's look at the wider situation.
On Thursday, the Federal Reserve reported that US household net wealth fell 4.5% in the third quarter of 2002 (from the second quarter) to $US 38 TRILLION. This is a seven year low. It also reported that the ratio between net worth and disposable income fell to a seven year low of 4.9 in the third quarter - from 5.2 in the second quarter.
Please note carefully that both these figures - net household wealth and the ratio between net worth and disposable income - are at their lowest levels since 1995. 1995 was the FIRST YEAR of the great US stock market boom and bubble which peaked in early 2000. On these measures, almost ALL the great "wealth effect" of the late 1990s stock market boom is now gone - except for one factor. All the "wealth" built up over the boom has been dissipated. Now, only the gigantic mountain of DEBT remains.
When the assets are gone and only the liabilities remain, the situation is frought with inescapable danger. The prospect of the repayment of debt recedes into near impossibility. What remains front and centre is the increasing doubt about whether the debt mountain can be SERVICED. As long as the debt can be serviced (and US interest rates have been slashed to the vanishing point primarily for this purpose), the prospect of future repayment can still be held onto. But once the spectre of debt repudiation through inability to service debt emerges, the jig is nearly up.
The prime cause of the increasing unease and debate over the prospect of "deflation" in the US is the growing worry about the inability to service debt. The extent of the worry over the prospect of debt repudiation and bankruptcy is the Fed's insistence that such a deflationary collapse CANNOT HAPPEN. Mr Greenspan, Mr Bernanke, et al have let it be known that they can and will create all the Dollars "necessary" to forestall this development. They have kept their mouths shut tight as to the obvious corollary of their prospective actions, a CRASH DIVE in the purchasing power of the Dollar, and an even more serious loss of "confidence" in the Dollar both amongst foreigners AND amongst Americans themselves.
The other "unexpected" statistic which came out on December 6 was a jump in US unemployment from 5.7% to 6.0% in November. The White House reaction to this was to politely request, and then accept, the resignation of Treasury Secretary O'Neill and White House Economic Advisor Lindsey. Mr Bush is, reportedly, concerned about the effect that rising unemployment may have on his re-election prospects in 2004. His "solution" is to shoot the messenger. Mr Bush continues to have nothing to say about the future viability of a US financial system drowning in debt and about the future viability of the US currency.
But US markets ARE beginning to have something to say about this. The Dow had its first "down" week since early October this week, ominously proving unable to break above its July/August rally high. The $US index swooned this week, bouncing off its 20-week moving average and threatening once again to drop below the uptrend line which has been supporting it - since 1995. And, of course, there is the $US Gold price which woke up this week after a month of doing essentially nothing.
Right now, the most vulnerable "asset" in the US is the US Dollar itself. On December 5, the European Union helped (whether on purpose or involutarily is not the point) when the European Central Bank lowered its controlling rate by 0.50% from 3.25% to 2.75%. This cuts the "premium" of European rates over US rates from 200 to 150 basis points. But next week, on December 10, the FOMC meets for the final time this year.
For almost everyone both inside and outside the US, it is now extremely hard to avoid recognizing that the "recovery" heralded by the US stock market rally of the past two months is not there. In reality, it never was there, but a little thing like reality has never stopped, and still hasn't stopped, Wall Street pundits from calling the "bottom" of the bear market and for gains reaching out from here into the rosy future. As the old saying goes - "fool me once, shame on you - fool me twice, shame on me." All we can say here is that anyone who can equate the present state of the US economy and financial system with increasing stock prices is doing an excellent job of fooling him or herself. The problem for Wall Street (and Washington) is that they aren't fooling too many other people any more.
Given the present economic and financial circumstances, it is the most natural thing in the world that Gold is once again "on the brink". With three trading weeks left in 2002, the "trick" will be to get it OVER the brink - ABOVE the $US 330 level. That "should have" happened long ago. It could happen on any given day from Monday, December 9 onward. All we can do now is wait and see if it does.
One final note, if and when Gold DOES break above the $US 330 glass ceiling, it is VERY likely to climb RAPIDLY. The chance to buy Gold, or buy more GOLD - cheap - may well be almost over. As far as Gold stocks are concerned, a plus $US 330 Gold price would be the signal for a new leg in Gold's bull market. Gold stocks have been patiently waiting for precisely such a signal for more than six months.