Wednesday, January 12, 2011

After Morning Struggle, Gold Gains Again

Despite a run-up that started just before the pit session began, and continued a little after the pit's open, gold spent the morning bouncing around with a slightly bearish tilt. This softening changed right after noon ET when the metal turned up decisively and spent the next two-and-a-half hours advancing. At the close of regular trading, the metal came to rest with another decent gain.

That early morning run-up fading, it was replaced by a ragged trading range that endured past noon. A second run peaked at a higher price than the first, but that run was replaced by a sagging that took gold down to $1,376. Rebounding, it settled into a narrower ragged trading range between $1,378 and $1,380. It was there that the afternoon run, starting at 12:10, got rolling. The metal rallied for more than an hour, reaching $1,387 right after the end of the pit session, before taking a breather until its next advance. At the end, or 1:30 PM, the spot price was $1,386.00 for a gain of $4.70 on the day. The Kitco Gold Index attributed -$8.80 to predominant selling and +$13.50 to a weakening of the greenback.

After that spike at the start of the electronic-trading hitch, the metal dipped down to $1,384. It then forded up to $1,389 before finally taking a rest for the day. From 2:30 to the end of regular trading, it stayed in a range between $1,386 and $1,389. At the end of regular trading, it closed in the upper end of that range: $1,388.00, for a gain of $6.70 on the day. The Kitco Gold Index assigned -$7.70 to predominant selling and +$14.40 to greenback weakness.

Gold's six-month chart, from, shows it beginning to chip away at the plummet of six trading days ago:

The metal's still in the lower part of its range, but it's advanced well above the bottom. The chart shows its third gain day in a row.

Technically, the picture is indeterminate. The relative-strength line at the top is just above neutral, and the Moving Average Convergence-Divergence indiator at the bottom is in a muddled state typical of a trading range. The way gold looks, it'll continue in that range.

Gold was certainly helped by the perhaps surprising victim of the successful Portugese government debt sale: the greenback. In the morning, shortly after the news, the U.S. Dollar Index went on a large tumble that took it from above 80.8 to just above 80.0. The rout was over by 2:00; subsequently, the Index hugged the 80.02 level in a narrow range. As of 5:30 PM, it was at 80.0250.

Its own six-month chart, also from, shows the magnitude of its tumble today:

Anyone who took the risk and shorted it last night or early this morning saw it pay off. Like gold, the greenback's currently in a range. And again like gold, the technical picture is clouded; such fuzziness is consistent with a range. I note that the 80 support level has held.

In a sense, today proved to be strange. The Portugese government avoided a pile-on of its debt, and gold wound up benefitting while the greenback got swacked. From another angle, it made sense. The Portugese government's happy day meant a good day for the Euro, and consequently a bad day for the U.S. dollar. Gold benefited in sympathy, also helped by the underlying demand for physical.

The damage to the greenback done, a further tumble isn't likely. In order to retake $1,400, the metal will have to draw from other sources of strength.

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