Despite there being no news around the time regular trading started, gold mounted an advance that carried it up to its daily high of $1,354.40. With nothing to sustain it, the metal then went into a decline that led to the only time in regular trading that the metal got below $1,346. At the end of the drop, just before 10:00, the metal touched its daily low of $1,344.20. Recovering, if choppily, it moved up to the top of its range before sliding down more slowly until bottoming again at the time the pit session ended. Then followed a modest advance, which turned into a more restrained decline, which gave way to the final spurt-up that put gold above the top of the range again. As of the end of regular trading, the spot price was $1,352.10 for a gain of $3.50 on the day. The Kitco Gold Index attributed +$3.80 to predominant buying and -$0.30 to a strengthening greenback.
The metal's six-month chart, from Stockcharts.com, shows Friday's decline coming to a gentle halt:
Not much has changed since Friday's chart, except for an added day's worth of confirmation that the worst is over. Since the market is quiet, a drift down to $1,340 wouldn't change the overall picture of an asset that's put its near-correction behind it. The metal's recent high is lower than its last two short-term highs, so I may be premature to conclude that it's completely out of the woods. It is, though, in a good position to make a higher low than January 27th's wash-out. Omitting that plummet-and-recovery leaves a sedate U-shaped bottoming that kept gold above the $1,325 support level. Adding it gives a V-cast to the bottoming, and the impression that the metal merely fell out of bed that day.
The U.S. Dollar Index distinguished itself by an upward run early in the morning that took it up to 78.35, but it lost that distinction throughout the rest of the day. Its two-wave decline from 10:00 to 3:15 brought it below 78 again. Trundling back upwards for the rest of the session, it surmounted 78 but couldn't get above 78.1. As of 5:30, it was at 78.055.
Its own six-month chart, also from Stockcharts.com, shows its now four-day upward run peaking:
At least, it's apparently peaking. The Index's run has been sufficient to pull it back up to where it was at the end of January, making for a complete recovery from its last short-term spill. A slump back down to 77.5 wouldn't change its short-term upwards bias; doing so would set up a short-term inverse head-and-shoulders bottoming pattern. Such a formation, if it goes to completion, wouldn't bode much in terms of a major reversal - but it would signal that the intermediate-term downtrend afflicting the Index might come to an end. The Index's Moving Average Convergence-Divergence lines at the bottom of its chart are very close to a bullish crossover.
It wasn't a great day for gold, but it was a good one. Today's lack of action, despite a robust stock market, shows that the recovery trade's effect on the metal has lessened in the past month. The afternoon Wall Street Journal report indicates that it's beginning to look beyond recovery to future inflation. There's little on the official horizon as of yet, but the upward thrusts of many other commmodities indicates there'll either be rising inflation or margin squeezes. Given the words coming from Fed chair Bernanke, the Fed prefers the former to the latter. As recovery continues, loan demand and supply will rise too. This mechanism is the means by which excess reserves get into the general economy (and push consumer prices up.) Distant glimmers that suggest over-the-horizon inflation are beginning to appear, and the gold market's starting to notice.
The overnight session, given the Chinese New Year holiday and lack of upwards price acclimatization in India, is likely to be a bit of a snoozer unless a surprise visits. Gold may well be around $1,350 come tomorrow morning.
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