The start of the regular day suggested otherwise. Although the opening of the pit session saw the metal rise a little, and then fluctuate between $1,374 and $1,377, a selling wave started just after 9:00 AM ET. By the time it was finished, more than forty minutes later, the metal had sunk to $1,362.90.
A Wall Street Journal article correctly ascribed the early fall to robust payroll data from ADP; that data was disseminated just before the decline got rolling. ADP's numbers showed private payrolls jumping to an increase of 297,000 for December. It was large enough for a cautionary note to be issued along with it. Even if distorted, this number proved to be cheery enough for gold buyers to pull out and sellers to jump in.
But not for long. After 9:45, the metal went on a sustained climb for the next three hours that left it at a regular-session high of over $1,379. After head-and-shouldering, it pulled back but not by all that much before the pit session ended. As of the end, or 1:30 PM ET, the metal was at $1,374.
The dip continued in the electronic-trading hitch, but not for long or very much. The short-term bottom of $1,372 came around 1:40. After getting back up to $1,374 and trundling along there for forty-five minutes, the metal slipped to around $1,372 again for a half an hour. Then, new buying interest entered the market and pushed gold back up until regular trading ended. At the close, as of 5:15 PM ET, the spot price was $1,378.60 for a loss of $2.70 on the day. The Kitco Gold Index attributed +$10.80 to predominant buying and -$13.50 to a strengthening greenback.
A look at the six-month chart (from Stockcharts.com) shows that the current range gold's in has indeed held up:
Although the bottom of the range has been spongy, today's squeeze at the bottom is comparable to that of mid-late December. Both the Relative Strength and the Moving Average Convergence-Divergence indicators, at the top and bottom of the chart respectively, show a not-so-pretty picture. The latter's black line is below the red line, which indicates a bearish configuration. There is the risk that the range will be broken through on the downside.
Still, the physical buying that's come in during overnight trading, and the buying that propped gold up today, suggest that the range won't be broken without a struggle from buyers. If it does break, the metal could go down to $1,325 - but such a drop is not apparent yet.
The help the greenback got from the ADP report wasn't much. Its release climaxed an already-existing rising trend that took the U.S. Dollar Index well above yesterday's levels. The Index was up to 80.31 by 9:35, but the definite breakout above 80 took place beforehand. After sinking back a little, it mounted another charge that stopped at 80.35 around 10:30. Then, the Index pulled back and meandered around the 80.20 - .25 level. As of 5:35, it was stuck at 80.23.
Its own 6-month chart (also from Stockcharts.com) shows my earlier pessimism was a little overdone:
Despite the afternoon pullback, the Index is well on its way to reaching 80.5, which would make the present formation a ragged-edged trading range. 81 would take the negative character out of the current pattern by making a higher high. The overall tilt is still negative, but that incline would end if the greenback keeps plowing upwards.
Turning back to gold, today was a test for the metal that did not find it wanting. It ended up a little lower on the day, but it completely erased the morning decline caused by the payroll report. There is a risk of a crack opening up at the bottom, but for now its range has held. Tonight and tomorrow's trading will reveal how much strength the bottom still has.
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