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Supportive to Gold


Got Gold???

The Bank of Indonesia cut interest rates again this morning, taking their key short-term rate down by (-)25 bp to 9.25%.

This is "supportive" to gold.

Philippine CPI came in below expectations, and at 3.9% it is down considerably from December's 4.6% yr-yr pace.

Given that this 'validates' the plunge in short-term T-Bill rates at Monday's auction, where the 364-Day rate hit a new record low of 3.99%, this too, is "supportive" to gold.

Moreover, the Philippine Peso is soaring to a new multi-year high.

This is not overtly bullion "bullish," although it does leave the door open for yet another official rate cut by the Central Bank.

Hence, this is "supportive" to the precious metals.

Nor is the decline in Russian CPI to just +8.2% (down significantly from December's +9.0% yr-yr rate), bullion bullish, though it too leaves the proverbial door wide open to yet another official rate cut from the Russian Central Bank.

This is bullion "supportive."

Moreso supportive to bullion is yesterday's news from Korea whereby Korean Broad Money Supply growth accelerated to a rapid yr-yr rate of expansion in December, pegged at +11.2%, reflating to a four-year high, and rising from +10.3% yr-yr growth posted in November.

Talk that the ECB might have cause to pause their rate hike campaign following the next (alleged) rate hike is "supportive" to bullion; as is the data from Taiwan, revealing that Core CPI has plummeted back into overt year-over-year deflation, pegged at (-)0.1% in January, sliding back into the 'red' from December's +0.70% yr-yr rate.

Thus, it seems likely that the Central Bank of China (CBC, the CB of Taiwan) also has 'cause-to-pause' their rate hike campaign.

Bottom line: the global macro-monetary backdrop remains slightly tilted towards bullion bullishness, as does the technical situation.

Observe the intraday chart of April '07 COMEX Gold, exhibited below, and we can identify the pertinent underlying support pivots as defined by the 100-period EXP-MA and the uptrend line dating back to the low set during the first week of the year.

Simply, a violation of the Feb '02 low at $648 would be a technical negative.

On a longer-term basis as evidenced in the daily chart below, a violation of the $640 level would 'void' the upside breakout while a move above $662 would represent a fresh upside push, opening the door for a serious test of the July high set at $695.

As I spotlighted in my macro-write-up above, Gold is once again asserting its upside appreciation against a myriad of paper currencies aside from the US Dollar. First, note the long-term weekly chart below showing this week's breakout in the price Gold 'denominated' in the South African Rand.

Indeed, relative to the Japanese Yen, the price of Gold has already forged a new multi-year bull market high, evident in the weekly chart on display below. In fact, since the beginning of the latest bull phase in Yen-Gold, from late 200, the price has tripled.

Most intriguing is the perspective offered by the mega-macro-monthly chart on display below, plotting the price of Gold relative to the value of the trade weighted US Dollar Index (USDX), which sits near a new all-time high in excess of $750 (adjusted price), in line with the record high set during the great bull market of 1976-80.

I ask...Got Gold???

My firm sure does. We remain bullish on both Gold and Silver.
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Positions in gold, silver
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