Gold Climbs Back Above $1,360

In the absence of any news to move it, gold recovered to above $1,360 today. Although a late-morning spill temporarily derailed it, the metal would have to wait for the afternoon to see its value eroded somewhat. Even with that afternoon decline, it still closed well above $1,360 with a moderate gain since Friday's close.

Its climb started just before regular trading began, and lasted most of the morning. As early turned into mid-, the rate of gain slowed as it settled in around $1,365. A surprise drop just before 11 AM ET left it dangling at $1,361, but that stumble was quickly reversed; twenty minutes later, it made a new daily high of $1,368.00. Then pulling back more slowly but more durably, it settled in around $1,364.

That level gave way after the pit session ended, leading to a mild drop that took the metal down to $1,361 again. That level became the floor for the afternoon, as the ceiling slowly lowered throughout the rest of the electronic-trading hitch. A final blip-up left the spot price at $1,362.00 for a gain of $5.50 since Friday's close. The Kitco Gold Index attributed +$8.45 to predominant buying and -$3.25 to a strengthening greenback.

Its six-month chart, from Stockcharts.com, shows its recovery not going far enough to lift it back to last week's level, but it did advance enough to get most-way there:



Of interest is the fact that gold's Relative Strength Index line (found at the top of its chart) is a little bit above the 50 neutral level. In corrections, 50 typically marks the RSI's ceiling. With Friday's drop, the RSI level stayed at 50 - and it wasn't followed by a further drop today.

What to watch for is the metal's next significant low. Should gold bottom at $1,340 after an extended decline, or even if it bottoms at $1,325, it will still have registered a higher low. Arguably, if Jan. 26's spurt-up is used, it's already got a higher short-term high under its belt. A higher low would solidify the Jan. 27th plummet down to $1,310 as being the seasonal low.

Moving to the U.S. Dollar Index, its gains from early in the morning melted away during regular trading. In a three-stage drop that lasted until early afternoon, the Index went from 78.87 to 78.5. Staying there only briefly, it snapped up to 78.65 and resumed a much more gentle decline. As of 5:30, it was at 78.59.

Its own six-month chart, also from Stockcharts.com, shows its gains continuing for a third day in a row:



After completing its inverse head-and-shoulders bottom, it managed to get close to 79 before tailing off. The chances of its recovery continuing smoothly has been lessed by its current gains, but the Index has turned a corner. Its higher low has been followed by a higher high. I wouldn't be surprised to see it make a run at 79 again before tailing back.

Gold seems to like $1,360 right now. When it falls below, it has the knack of climbing back up again. Although the gains have not been enough to establish a solid trend, they have been enough to keep the metal from further extended slides. It's mid-February now, past the point when gold tends to make a seasonal low. If the rest of this winter resembles the same period last year, gold will meander directionlessly before picking up steam again. That's not a bad place to be. As for its performance in the overnight session, it may take a dive down below $1,360 again due to lack of Asian buyer interest - but I see no real reason why that dive will be either extended or steep, unless the latest mainland Chinese inflation data contains a bad surprise. That data's due to be released during this overnight session, and it will be the highlight of the shift if it comes.