At the beginning of February 1996, spot future Gold closed above the $US 410 level for four consecutive trading days - February 1,2,5, and 6. The highest spot future close over those four days was $US 414.70 on February 2, 1996. The highest intraday high over those four days was $US 416.70 - also on February 2, 1996.
Over those four days in early February 1996, Gold traced out what proved to be the TOP of a three year bull market which had begun in February/March 1993 with Gold at the $US 325 level.
On December 29, 2003, spot future Gold closed at $US 414.80 - up $US 2.50 on the day and ten cents higher than its bull market spot future close high of February 1996. Spot future Gold's intraday high on December 29 was $US 415.90 - ninety cents below its intraday high in early February 1996. Gold has reached the top of its previous bull market after 19 consecutive trading days above the $US 400 level. In 1996, at the top of the previous bull market, Gold traded above the $US 400 level for 21 consecutive trading days between January 22 and February 19, 1996.
In between February 1996 and the end of 2003, Gold swooped all the way from $US 414 to a spot future closing low of 253.00 on August 25, 1999. That low was very closely duplicated on April 2, 2001 when spot future Gold closed at $US 255.60. From those lows, Gold finally decisively punched back above $US 300 in late March 2002 and above $US 400 at the beginning of December 2003.
So, the "wheel" has come full circle. Gold has just closed at its highest spot future level in more than a decade. In between 1996 and 2003, it plumbed depths that had not been seen in more than two decades - since early 1979. It was quite a ride.
The depths of Gold's bear market in 1999 - 2001 coincided with an event which will prove to be epochal. This was the top of the biggest bull market in Wall Street history in January - March 2000. And then, shortly after Gold began its new bull market, came an event which prove to be even more important. This was the top of the US Dollar bull market and the beginning of the slide in January 2002.
As Gold reached its $US 414.80 close on December 29, the US Dollar index plumbed a new low in its bear market since January 2002 when it closed at 87.74. Gold is going up, the Dollar is going down, no great surprises there.
The "anomaly" of the whole situation, of course, is the performance of stocks on Wall Street, especially since Gold finally managed to break above its February 2003 highs in November. The major US stock indices (the Dow, Standard and Poors 500, and the Nasdaq) have been going straight up since mid/late November. At its closing level of 10450 on December 29, the Dow's percentage gain for 2003 is now just ABOVE its percentage gain for 1999 - the biggest year of the Clinton Bull.
This, clearly, does NOT fit the picture put forward by the financial and economic condition of the US as we approach 2004. Nor does it fit with a strenghtening Gold price and a weakening Dollar. By all historical precedent, something is going to have to give in 2004. Economically and financially, Gold should continue to climb and the Dollar continue to sink. Politically, of course, the reverse is the "preferred" option, with the Dow and the Dollar strengthening and Gold weakening.
2004 is going to be a VERY political year, with the Presidential elections in November. Normally, in election years, the Fed stands ready to lower rates if necessary if there is any hint of an economic slowdown on the horizon. That won't happen this year, there are no interest rates to lower. A cut of the present 1.0% Fed Funds Rate with the Dollar firmly mired in a two year bear market would cause more problems than it is designed to "cure". The Fed is already at the end of its tether.
So, Gold is on the verge of reaching levels not seen since the late 1980s after a bull market which, so far, has lifted the price from $US 255.60 to $US 414.80 - that's $US 159.20 or 62.3% - since April 2001.
As we said last week in our $A/$US Gold Comparison page: "Gold ...will take off as soon as investors are confident that Gold is not going back below $US 400. That could take place on any Comex spot future Gold close between $US 414 (the old 1996 bull market high) and $US 420."
We have had our first spot future Gold close since early 1996 "between $US 414 and $US 420. There are two trading days left in 2003 to get more. Whether it happens this year, or early in January next year, Gold is poised on the brink of accelerating its bull market. You have been warned.
To all reading this page, A VERY HAPPY NEW YEAR! The next Gold commentary will be posted on our regular Friday schedule on January 2, 2004.