Open interest is down on the Comex by about 20% in two weeks. NMRothschilds has foresaken the paper Gold market in London. Silver has been decimated, falling more than 20% (over $US 2.00). The French have reported to be considering selling gold - Sacre Bleu! London's Financial Times have come out with a editorial sneering at Gold. Mr Greenspan has testified to the Senate about the primary responsibility of the Fed being to promote "price stability" (WHICH prices, Mr Greenspan?). Mr Welteke of the Bundesbank has resigned over a picayune $US 7,000 or so in undocumented "travel expenses". There are published "rumours" that Gold miners might be considering getting back into their Gold hedges. There's more, lots more, but that list will do.
We have seen concerted efforts in the past to "cap" the $US Gold price - many of them - but we'll be damned if we've seen one as concerted as the one which has taken place since the Easter long weekend.
Why, you ask? Many reasons, but for the biggest of them all, take a look at these two tables, they document the rise in the Gold price - in ten different currencies - in the two weeks between March 12 and March 26:
(From Gold This Week - March 19, 2004)
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(From Gold This Week - March 26, 2004)
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For the financial "powers that be", not only in the US but everywhere else in the world, these two tables document the second truly dangerous short period in the Gold markets since Gold first broke above $US 300 to stay way back in March/April 2002.
The first of these dangerous periods came in late 2002 - early 2003 when Gold broke through to new bull market highs above $US 330 just before Christmas and then stormed upward to the low $US 380s in the first week of February. This was the first period during which Gold was storming higher in terms of ALL currencies, not just the US Dollar and currencies tied to the US Dollar. Gold was rising against all currencies despite the fact that the US Dollar was falling.
That Gold upmove was stopped in its tracks by a speech given at the UN on February 5, 2003 by US Secretary of State Colin Powell. The effect of that speech was to finally convince the rest of the world that a US attack upon Iraq was absolutely inevitable. The attack duly took place, and by the time Mr Bush gave his "mission accomplished" speech at the beginning of May, Gold had come all the way back to the low $US 320s.
The point to be emphasised here is that while the $US Gold price has broken above the highs it set in January 2003 and is still above them now despite being more than $US 30 below its levels of the beginning of April, Gold in terms of most other major currencies (Euro, Canadian Dollar, Aussie Dollar, Pound, Swiss Franc, Yen, etc) have NOT. In all those currencies, the high on the Gold bull market was set in January/February 2003 and has not been breached since.
There was another episode in late 2003-early 2004 during which Gold broke through $US 400 and went on to stop just short of $US 430 in early January. Just is had been the case in Gold's big run a year earlier, the $US price was boosted by a falling US Dollar.
But then we had Gold's run as shown in the two tables above. Once again, Gold set new bull market highs in US Dollar terms. Once again, Gold was rising in terms of all major currencies, although it did not break through the 2003 highs in terms of these currencies. But this time, Gold was rising in the face of a RISING US Dollar.
This phenomenon posed the deadliest of dangers to the financial powers that be and to the paper market analysts, especially those in the US. Most of Gold's bull run, when it was noticed at all by the bureaucrats and the mass media analysts, was put down to a weaker US Dollar. It was stated that as soon as the Dollar had fallen far enough to make US business "competitive" once again, the last part of the "recovery", new job creation, would be put in place. Once that happened, the Dollar would recover and Gold would do what it "always" does and head south again.
Well, the $US index fell from a high of 120.59 in January 2002 to a 2004 low (so far?) of 85.12 on February 17, 2004. Then, as the Dollar began to recover, Gold fell back. But as the Dollar recovery continued, Gold turned around and stormed all the way up to and just above its previous 2004 highs by the end of March. It was THIS period, during which Gold was setting new bull market highs in $US terms and getting very close to them in both Euro and Yen terms, which was so potentially dangerous.
The danger came from the simple fact that if Gold had continued upward and set new bull market highs in terms of ALL major currencies, an unavoidable signal would have been broadcast that the global financial system was in BIG trouble. Now, of course, the global financial system IS in big trouble, but the symptoms were being masked.
The US economy was "in recovery" claimed the "experts", ignoring the fact that only utterly profligate borrowing by both public and private sectors was keeping it from imploding and only GIGANTIC Dollar purchases from Asia was keeping the Dollar from imploding. Asia is booming, claimed the "experts", ignoring the fact that Asia was lending the US the money to buy its exports and blowing out its financial system on the basis of the huge amounts of "reserve assets" (US Dollars) it was buying to hold up the Dollar and its export markets. Inflation is not a threat, claimed the "experts", blanking out the rising price of almost everything.
The world in general but the US in particular has built a "Potemkin economy" - a fragile facade of "prosperity" and "order" behind which is incipient poverty and chaos. Count Potemkin got away with it when he was conducting Russian Empress Catherine on a tour of her dominions. None of the facades fell down. The modern "paper hangers" were getting away with it too, albiet by dint of ever greater efforts to induce the public to ignore the evidence of their own eyes - and wallets. Count Potemkin would not have survived a windstorm which blew down the facades and exposed the REAL state of Russia to its Empress. The modern paper hangers would not have survived a rampant Gold price which would have exposed their "village" for what it was, a makeshift make believe.
So, Gold (and Silver) have been "capped" on the futures markets one more time. As you can see on the Gold chart at the start of this piece, the spot future Gold price has recoiled back to find support at its 200 day moving average just above the $US 390 level. On an intraday basis, the downmove has gone as low as $US 390.00 on this move. During the previous pullback in February/March, the intraday low was $US 388.20.
Has this move bottomed out? Not enough evidence is in yet to say. But, as Richard Russell has pointed out, the 200 day moving average has supported this Gold bull market ever since it got started. On the initial evidence, it is doing so again.
Now, look at the duration of the Gold pullbacks since the start of 2003 and Gold's highs in terms of other major currencies. Gold corrected in February 2003. It took until late October - almost ten months, for it to hit new highs. Then, Gold corrected in early January 2004. It took less than three months, until late March 2004, for Gold to get back to its highs. Gold set its bull market highs in $US terms on April 1. That was not quite a month ago. If the recent intraday low of $US 390 was the bottom (we don't know that yet), then it shouldn't take long for Gold to regain its highs of the beginning of this month.
Remember - Gold in terms of the other major currencies has yet to regain the highs set more than a year ago - in January/February 2003 - before the huge distraction and subsequent quagmire in Iraq ever took place.
We were looking for new bull market highs in Gold in terms of the $US and the Euro a month ago. We got the $US high but not quite the Euro high. We are still looking for that event to happen. The latest Gold correction will postpone it. We don't know for how long, but we are perfectly happy to relax, and wait for it.