The peak of the day, $1425.00, was reached right around the time the pit session started. By 8:30, the metal had fallen to $1,418.
That fall looked like a derailment, which would be overcome once a fitful short-term range was broken out of on the upside at 9:30. The metal rallied until 10:00, reaching $1,423 in the process, but the rally lost steam at about the time the ISM manufacturing survey number was released. It was above 50%, and above last month's reading, but the value of 57.0% was half a percentage point less than expected. A breakdown into components, though, showed business was getting better on the domestic front. Only inventories and exports showed a significant weakening. The stock market tended to like it, but the gold market didn't.
Gold's return rally broken, it slid down to a new daily low of $1,415. For the second time, the market tried to shake off the drop. Rallying slowly from 10:30, the metal clambered up to where it was at 10:00. By the end of the pit session, or 1:30 PM ET, spot gold was at $1,423.00 even for a gain of $1.40 since Friday's close. The Kitco Gold Index attributed a $2.75 rise due to predominant buying and a -$1.35 drop due to strength in the greenback.
Once the electronic-trading hitch began, the metal sank again. Starting slowly, it roller-coastered downwards to the $1416 range by 2:20. A pause preceded a further drop, taking the metal down to the $1413.50 - $1415.50 range where it stayed stuck in until the end of regular trading. As of the close at 5:15 PM ET, the spot price was $1,414.60 for a drop of $7.00 on the day. The Kitco Gold Index split the loss into -$3.25 for predominant selling and -$3.75 for greenback strengthening.
A longer-term prospective from the six-month chart shows a less depressing picture:
The picture of gold since last fall's rally shows an ascending triangle with a ceiling of $1425. Right now, even with today's drop, the metal's closer to the ceiling than the floor. The relative-strength line at the top of the chart shows a softening even as gold has pushed higher, indicating a divergence which doesn't bode well for the ceiling being broken soon. The Moving Average Convergence-Divergence lines at the bottom show a similar divergence with lower highs. Both indicators suggest that gold will have some churning to do before a new record high is made.
As for the U.S. Dollar Index, it had an early-morning rally itself that disappointed in the mid-morning although its breakdown took place a little later than gold's. Topping out as of 10:10 AM at 79.365, it went through its own roller-coater decline that pulled the Index below 79 by 11:20. Unlike with gold, though, that low marked the low of the regular trading day. After bouncing around between 79.0 and 79.1, the Index picked up steam and ralled throughout the afternoon. By 5:30, on the tail end of a mild pullback, it had reached 79.17.
Its own daily chart shows it to be at the bottom of a range, carving out a pattern that doesn't inspire much confidence:
Today's gain comes on the heel of three straight trading days of losses, which carried the Index to its 79 support level. Its own relative strength line is still below the 50 neutral level, and its MACD lines at the bottom still show a definite bearish configuration. The Index may continue to bounce back, but I'd be surprised if it reaches 81 before turning back. Even 80 is somewhat iffy.
Given the ISM data, the most likely cause for the afternoon fall is lack of buyer interest due to the U.S. economy not being that bad. There wasn't much of a late-afternoon rise in the averages, so equities didn't directly pull away a lot of money from the gold market. The greenback's afternoon rise may have contributed to gold's softness as there was no crisis-related reason for the Index to do so at that time. This afternoon, there was little to fear.
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