In US dollar terms gold barely budged in the past week, generally meandering listlessly within a couple percent or so on either side of $430. It is certainly understandable why American investors are likely to consider this week's gold markets relatively uninspiring.

But as a student of the markets, I consider this past week among the most exciting I have seen in gold since 1999! It is right up there with the sharp Washington Agreement gold spike in late 1999 as well as the fall of the $325 Gold Maginot Line in late 2002 that had vexed us for the early years of this bull market.

Have I gone mad? Perhaps. But I believe that a decisive breakout of gold prices in euros above €350 an ounce may be the single most important event in this entire gold bull to date. New all-time euro gold highs above €350 have a great chance of gutting the psychological minefield surrounding this oppressive resistance zone and ultimately unleashing vast new international investment demand for gold.

And once serious international capital joins the American dollars already bidding gold into a secular bull, there is a good chance this extra demand will act as the long-awaited catalyst to force gold to decouple from the dollar bear. After this decoupling gold will rise in all currencies simultaneously and worldwide investment demand will grow dramatically. Nothing begets investment demand faster than rising prices.

Just this past week, for the first time ever, euro gold spent multiple consecutive days over €350. It also hit new all-time record highs, €355 specifically before the Wednesday night data cutoff for this essay. After waiting for this day for years, I am so thankful to finally be able to witness it. €350 is a far greater boon for gold than even $500 in dollar terms. These are incredibly exciting times!

To gain an understanding of why €350 is likely to be such a pivotal tipping point for global gold investment demand, let's dive into the charts. Our secular gold bull is truly marching into unprecedented territory now and the implications of the apparent fall of €350 are profound for investors around the world.

As I have discussed in past euro gold essays, the secular gold bull since early 2001 is largely viewed as a dollar phenomenon outside the States. The US Federal Reserve is relentlessly inflating and debasing the fiat dollar and Washington has no intention of ever spending less than it taxes from us. All throughout history gold has risen in nominal terms, maintaining its timeless value, as fiat currencies are abused by governments until they crumble.

American investors see this nominal price rise and call it a gold bull, for as the weaker the dollar is bled the more dollars it takes to buy one ounce of gold. But European and other foreign investors see a very different picture like this chart above. In extra-dollar terms gold has generally been meandering sideways for over three years now. Naturally this inspires little confidence among extra-dollar investors.

In early 2002 euro gold first challenged €350 but soon failed after three valiant attempts. Thus European investors, at least the ones who measure progress from interim tops, have understandably considered gold to be in a bear market since early 2002. Euro gold has ground sideways at best and only this week has finally exceeded the stale highs of early 2002.

Now to help us Americans put this into perspective, imagine how popular gold would be today if it had never exceeded its early 2002 highs near $305. If gold had fallen under $305 for three whole years, never going higher, not even many contrarians would have the patience to invest in gold. And it would definitely not be considered a bull since there would be no obvious secular uptrend.

From a European perspective, this is exactly what happened. Gold had some promising moves higher in early 2001 and early 2002, but since then it has gone nowhere. Why invest scarce capital in an asset that can't even manage to make a new high for years? Obviously gold wasn't very popular outside the States since most of its dollar gains were directly offset by dollar losses from the dollar bear market.

I have been waiting for €350 to fall for a long time and have been advancing a theory on euro gold while I waited. As discussed in April, euro gold has been in a stealth bull. While most European investors refused to admit it, the euro gold chart wasn't as ugly as it seemed at first glance. The various technical evidences for this thesis are readily apparent.

First, note the secular support line rendered above. While euro gold highs were not rising, its lows certainly were. These higher lows carved a very well-defined support line too, having never decisively violated it with at least four major intercepts. And when a parallel top resistance line is added, it also has four major intercepts and fits the data rather nicely. This bullish uptrend is confirmed by euro gold's 200dma gradually meandering higher in parallel with the secular uptrend.

With solid uptrending support and resistance lines and a rising 200dma, there is little doubt euro gold is in a bull market from a technical perspective. But the problem is the short-lived spikes above resistance in 2001, 2002, and 2003 mask the underlying trend. European investors remember these earlier €350 attempts so well that they have become the primary point of reference for these investors. In fact, €350 has become the de facto perceived resistance.

Per my euro gold stealth bull theory, these extra-trend spikes in 2001, 2002, and 2003 are just anomalies. It is not uncommon for prices to temporarily leap out of a secular trend, in either direction, and then quickly revert back into the trend a little later. Technical analysts traditionally don't ascribe any serious weight to extra-trend spikes that soon collapse back into their primary trend. These anomalies are not rare at all.

In light of these anomalous technicals, a vexing psychological conflict was created in European investors' minds. The failed €350 attempts in early 2002 and early 2003 led to an unshakeable perception that €350 was insurmountable resistance. But in reality, the actual resistance was the rising line parallel with euro gold support. And this true resistance line did not cross €350 until only the past year or so, thus it was highly unlikely euro gold could have decisively overcome it sooner.

In the markets, for better or for worse, perceptions have a way of becoming reality. If European investors largely perceived €350 as being ironclad resistance, then it indeed became so. Until €350 decisively fell, there was little hope that Europeans would get excited about gold again and start adding their capital to the mix. This posed a problem for the secular gold bull since these bulls require ever-increasing participation and capital to keep accelerating higher.

In order for this €350 European gold Maginot Line to fall decisively, it has to exceed €350 by 2% or more for long enough for the average European contrarian investor to notice that something is different. Technicians use this 2% rule on major breakouts to help filter out random daily noise. In euro gold terms this equates to €357. While we hadn't seen €357 yet as of Wednesday's close, by the time you read this it may very well have come to pass.

While it is not difficult to understand why €350+ gold is a big deal to Europeans as it represents new all-time highs and guts the psychological malaise, even more important is why sustained €350+ prices are likely to be a huge breakthrough for the gold bull in general. €350, amazingly enough, is my leading candidate for the catalyst for Stage Two!

Great secular gold bulls tend to go through three stages. Stage One, which runs for the initial third or so, is driven by a currency devaluation in the dominant currency used in world commerce at the time. Gold prices rise in Stage One, albeit at a slow pace, more or less directly offsetting the weakness in this currency. The incredibly precise inverse relationship between gold and the dollar in recent years bears this out.

Dominant currency devaluation eventually leads to Stage Two, where gold starts rising in all currencies simultaneously. The driver for Stage Two is global investment demand. In Stage One contrarians located in the devaluing dominant country grow excited about their own local-currency bull. This excitement gradually spills out and the rest of the world takes notice. When the rest of the world starts bidding on gold as well, its prices have no choice but to accelerate higher in an increasing upslope.

It is not the mines or the central banks that ultimately control the gold price, but worldwide private investor demand. Mines can produce all the gold they want, but if private investors demand still more the gold price will be forced to rise anyway. Central banks are in the same boat. If marginal private-investor demand exceeds central-bank selling, the gold price will climb higher regardless of absolute amounts involved.

I suspect €350 is possibly the major catalyst for igniting Stage Two for several reasons. The euro is now the second-most important currency on the planet, a remarkable achievement after less than seven years since its controversial birth. If gold prices continue to carve new highs in euros it will alert savvy European and other foreign investors that there is much more to this gold bull than a dollar bear.

As Europeans and other investors start taking notice, gradually a fraction will begin going long gold to ride the momentum from the €350 breakout. This marginal international buying that has not yet existed for this gold bull to date will push gold prices higher. And gold, like most investments, has a fascinating inverted demand curve.

In the normal non-investment world, the higher the price of something the lower its overall demand. Perhaps you'd be willing to pay $10 at a restaurant of your choice to eat lunch. But would you pay $100 for the exact same lunch? I doubt it. Rising prices retard demand in normal consumable items.

But with investments, and especially with gold, the higher their prices go the greater their demand becomes. Gold near $430 today is far more attractive than it was near $255 when this gold bull launched in early 2001. And once gold hits $500 it will be even more exciting and attract in more investors. The higher it goes, just like the NASDAQ bubble before it burst, the more people will rush in to buy to chase the momentum. Rising prices enhance and amplify investment demand.

So if a decisive and sustained €350 breakout is enough to get the Europeans interested in investing in gold again, it may very well ignite a virtuous circle. Europeans will buy gold, driving its price higher. Other investors around the world including Americans will see gold rising in local-currency terms so they will want to chase the gains too. And more investing spawns higher prices which lead to more investing. This is how great secular bull markets are fueled.

And such accelerating self-feeding marginal global investment demand, considered in the aggregate, ought to be more than enough to cause gold to decouple from the dollar and enter Stage Two. The ultimate gains in Stage Two, incidentally, should utterly dwarf the Stage One gains we have seen to date in the States. Just as a tiny spark can ignite a great fire, €350+ could very well trigger a chain of events that ushers in the glorious Stage Two.

See why I am excited about all of this? $500 gold in the States would mean nothing to international investors and their vast pools of capital if it just meant that the dollar was getting weaker and gold was treading water in real terms. But €350+ forces extra-dollar investors to at least consider this gold bull as the real deal. It is much more convincing to international investors than any reasonable dollar gold milestone would be.

With the very promising strategic picture fleshed out, there are still some tactical considerations to ponder surrounding €350. This final chart zooms into the euro gold scene since 2004 and helps put the latest €350 breakout attempt into its proper short-term context.

Ideally I would have preferred the €350 breakout to rise in a more gradual controlled fashion. Financial markets often sport undeniable symmetry and sharp moves up often precede equally sharp corrections. Thus, it would not be too surprising to see euro gold retrace a bit.

Euro gold's primary bull-market support is now near €325, and since this line has not been violated for over four years now odds are it will hold just fine today. A more likely worst-case retracement target for this latest spike is euro gold's 200dma, about €332 today. An even more reasonable Fibonacci retracement would probably see euro gold consolidate near €345. So even if euro gold breaks €357 (€350 + 2%) and then retreats temporarily, it is nothing to fear.

On the top side euro gold's actual resistance is running about €365 today, so we are unlikely to see euro gold go much higher than that over the short term unless Stage Two demand materializes even faster than I expect. Regardless of where the next short-term interim top is carved though, the past week's €350+ events will force international investors to reconsider €350 as inviolable overhead resistance. That illusion is shattered.

Euro gold's blistering surge from its 200dma to €350+ in the last few weeks is a direct response to the rejection of the EU Constitution by major member nations. I discussed this in some depth a couple weeks ago. The no votes damaged short-term euro confidence then the resulting sharp slide in the euro along with a stable dollar gold price fed today's €350 surge. Since the no votes merely preserved the status quo, I really doubt they will adversely affect the euro for long.

Interestingly the euro itself, the red line above, is also in a strong support zone near $1.20. This suggests the euro is due for an oversold bounce that could move up sharply. Such an event could play out in euro gold in a couple ways.

If the euro was to rally 10% in the next couple months to work off its panic oversold conditions, then euro gold will take a hit if dollar gold remains stable. At $430 gold and a $1.20 euro, euro gold would run about €358. But if the euro rises 10% to $1.32 and dollar gold remains at $430, then euro gold could retreat all the way to €325 temporarily, which is not incidentally right on its long-term bull-market support line.

But a far more likely scenario is the euro rallies 10% and its nemesis the dollar falls by a similar amount. The US dollar is incredibly overbought today and definitely due to start its next major bear-market downleg sooner or later here. If the euro climbs to $1.32 and the dollar falls 10% too, then dollar gold is likely to rise 10% to $475. This keeps euro gold stable near €360 and would certainly help international investors grow more excited about gold.

The real wildcard in all this analysis is the level of marginal new foreign investment that €350+ spawns. If enough foreign dollars start bidding on gold it will enter Stage Two and rise in all currencies regardless of the short-term outcome in the dollar and euro's war for global supremacy. We would then have to move to a whole new analytical paradigm where gold was no longer merely a slave to dollar weakness.

And I am encouraged to report that international investors are taking notice of €350. I've been talking about this event for years and right away last Friday after the €352 record close I started receiving e-mails from around the world on €350. They've continued to flow in over the past week and I sense a growing level of excitement outside the States, at least in the folks who graciously wrote to me.

€350 may indeed prove to be the long-awaited catalyst to ignite Stage Two, where the gold bull powers higher in an accelerating upslope independent of all currencies. If you are looking to play what could prove to be the most important technical development of our entire gold bull to date, you may want to get a copy of our current June Zeal Intelligence newsletter.

In this month's issue I outline about a dozen gold stock and gold-stock options trades that are likely to be outstanding performers when gold's next major upleg launches. And considering how awesome the past major uplegs have been, the particular upleg that happens to coincide with the launch of Stage Two ought to be spectacular. Please subscribe today!

The bottom line is euro gold €350 is an incredibly exciting event that is one of the most important technical milestones in this entire gold bull to date. Sustained €350+ prices have a good probability of igniting gold investment demand from extra-dollar sources that has not been active so far. This marginal international demand could very well break the dollar's stranglehold on gold and usher in its glorious second-stage bull.

All contrarian investors around the world should carefully watch euro gold in the coming weeks and months. Hopefully €350 is just the beginning!