Almost a Record

I had been expecting gold to close the month of February above $681.50. A close above $681.50 would be significant because it will be a new record monthly close. But it didn’t happen. On February 28th gold closed at $669.40.

In January 1980 gold had a momentary spike to $850, but it actually closed that month at $681.50. Perhaps more significantly, the gold price averaged $671.85 for that fateful month 27 years ago. The monthly average for February 2007 was $666.08. So however one looks at it, gold is closing in on new records, an accomplishment already reached by the CRB Continuing Commodity Index.

The CRB made another all-time month-end high, closing February 2007 at 410.64. It won’t be long I expect before gold achieves a new all-time high as well.

In many respects gold is following the script played out in the 1970’s. The same problems that drove gold higher back then are repeating today. There are too many dollars creating inflation. There is a deterioration of asset quality in the financial system that debases the dollar. These problems are not being addressed, so it is logical to assume that the uptrend in gold will continue. In this regard, I draw your attention to the following chart.

While gold climbed throughout the 1970’s, we often forget that the decade-long uptrend was actually comprised of two multi-year bull markets. These are marked by red ovals on the above chart, but note something else on the above chart that is also important.

Look at what happened in the 1970’s when gold starting pulling away from the green uptrend line. Gold never looked back, until peaking a few years later.

Now compare the two ovals for the 1970s to the one I’ve drawn for today. Gold is again pulling away from the green uptrend line. It is this superb technical action that had been leading me to think that gold would end February at an all-time record monthly close. It didn’t reach that milestone, but it doesn’t mean that gold’s bull market has ended. Rather, my expectation was probably just one or two months too early.

Published by GoldMoney
Copyright © 2007. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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