Given where it had closed at yesterday, any upward turn in the overnight session would have been little more than a relief rally - but it would also be a sign that yesterday's rout would not continue today. Both happened, with gold reaching close to $1,320 by the time regular trading opened. The 4th quarter U.S. GDP number of 3.2% annualized was both an improvement on the third quarter's and below expectation for 3.5%, but the strength of the consumer-spending component ended up being taken as a negative by the gold market. By 9:25 AM ET, the metal had sunk back down to $1,310.
Then, its run started - one that would not stop until the daily high of $1,348.30 was reached shortly after noon. That's almost a forty-dollar gain in two and a half hours. After the peak, the metal slowly setted into a range between $1,335 and $1,340. Just before the close, spot gold moved from the lower end of the range to the upper to close at $1,338.40. The Kitco Gold Index attributed +$30.60 to predominant buying and -$7.10 to a strengthening greenback.
As that attribution indicated, it wasn't just gold that benefitted from the Egyptian turmoil. As a Wall Street Journal article explains, both the greenback and the Swiss franc benefitted as well today. [Perhaps the gains in the latter have something to do with coming conversions of funds into Swiss-franc bank accounts from a certain region of the world.] Oil did, too. Interestingly, silver benefitted alongside gold to the tune of 3.3% in the pit session - but platinum and palladium barely budged. Thoughts in the metals markets were not occupied by recovery today.
As for gold's six-month chart (from Stockcharts.com), it shows yesterday's drop mostly but not completely erased:
Yesterday's breach of the $1,325 support level is now history; gold is now slightly above where it was on Tuesday. Granted that it took a regional uproar to put the metal back in its old range, but what was done yesterday is now undone. It is possible that today's conflict-driven upswing was anomalous too, in which case gold will drift back lower once the region calms down. Even if so, today's action still demonstrates the latent fear out there that just needs to be triggered by a disaster. Although other safe havens benefitted, gold did so in spades. Anyone who bought on the heels of the panic at $1,310-20 has good reason for an enjoyable weekend.
As noted above, the U.S. Dollar Index also benefitted. After attempting for more than a day to break the 78 level, the Index succeeded: the Egyptian turmoil amplified a rally that was already in place before regular trading opened. Its run lasted longer than gold's, peaking at 78.28 as of 1:45 PM. Then, like gold, it tailed off into a range: 78.1 to 78.2. At the end of the week, it halted in the middle of the range at 78.15.
Its own six-month chart, also from Stockcharts.com, shows today's gain as an overdue respite from five days of declines:
Since there hadn't been any wash-out on this market, today's jump put the Index above where it had closed on Monday. Still, it looks like a short-term reversal in an already-established downturn. The turmoil may continue, but such crises in and of themselves do not make for a sustained basis for rallying. The Index may squeeze a run up to 79 in the aftershock, but the overall trend is still downwards.
The Egyptian mess, I must confess, was a surprise to me. I don't like to compound that by being a party-pooper, but the same underlying conditions still dog gold. A change in perspective may result from today's uproar, and a reversal of gold's downtrend would gibe with seasonal weakness ending in early February. Still, recovery hopes that were shelved today may end up eating away at the metal's gains once again. There may be other buying opportunities in the near future.
In closing, I'd like to thank you again for stopping by and reading what I've posted. Today's action is the perfect cure for the winter-weekend blues.
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