Gold, After Early-Morning Jump, Ends Above $1,370

As noted by the Wall Street Journal, the more than ten dollar jump by gold at 4:30 AM ET was the result of U.K. inflation rising from 3.7% to 4.0%. The earlier-telegraphed Chinese inflation data, which showed a below-expected but above-target rise to 4.5%, proved to be a non-event for gold. [The morning round-up here erroneously credited the Chinese number to the jump engendered by the U.K. number; my apologies for doing so.] Trading during the regular session, despite some fluctuations, was pretty much a non-event too. That overall directionless meant a good day for gold all told, with the metal racking up a double-digit gain on the day when regular trading was over.

At $1,372 just before the pit session opened, the metal bounced up in part because of
a disappointing U.S. retail sales number. Instead of the expected 0.6%, retail sales for January went up only 0.3%. After the number was released, gold fluctuated between $1,375 and $1,376 before trailing down. That decline didn't reach $1,370, and the high to low established the borders for the range gold would stay in. Its subsequent bounce-arounds centered at different levels, but didn't change the overall horizontality. At the end of regular trading, the spot price was $1,373.30 for a gain of $11.70 on the day. The Kitco Gold Index attributed +$11.70 to predominant buying and -$0.40 to a strengthening greenback.

Gold's six-month chart, from Stockcharts.com, shows it advancing over the levels set by last week's hesitation:



Technically, today's rise was a break through a resistance level of about $1,365. As such, it was a significant addition to gold's still-running short-term uptrend. Today's high is very close to touching the $1,380 interday high of January 19th, made just before the downturn that led to the climactic plummet of January 27th. Gold is in a good position to carve out an inverse head-and-shoulders bottom of its own, with $1,380 the neckline. I should note, though, that head-and-shoulder formations aren't very reliable for gold. Thinking that they are, I know from experience, tends to be frustrating.

As for the U.S. Dollar Index, it sunk before regular trading but spent the day slowly climbing back. Almost horizontal itself, it nevertheless accrued enough of a gain to put it back to about where it was at the end of yesterday's regular trading. As of 5:30, it was at 78.60.

Its own six-month chart, also from Stockcharts.com, shows a tack-like candlestick representing today's trading:



Although markets are not that smooth, it's tempting to interpret today's action as the end of its rise after it surmounted 78. I expected the Index to make a try for 79, but that hope wasn't met. Still, its Moving Average Convergence-Divergence lines at the bottom of its chart still show a bullish configuration - for a duration that hasn't been this long and definite since fall last year. That doesn't mean the greenback will go on a tear as it did last fall, but it does mean that the Index shouldn't be bet against.

Gold's technical position is definitely looking better, perhaps good enough for Asian traders to hit the buy button again. They may continue to view gold's rise as unjustified, in which case there'll be little buying again tonight. But gold's stop and start action shows a latent bullishness that's still there, even if hidden by the more-vaunted recovery trade. The metal may well stay above $1,370 by the time tomorrow's regular session begins.