At the beginning of the pit session, gold hovered in the high 1330s and didn't start declining until just before that ISM release. Once out there, it pushed the metal down to $1,324.50 before the bounceback set in. Despite the gloom, $1,325 ended up holding. Initially sputtering, the reversal accelerated as morning turned into afternoon; the metal peaked at $1,344.30. Then running out of gas, it pulled back down to about $1,338 early on the the electronic-trading hitch. Staying there for an hour, it lumbered up enough in later afternoon to best the $1,340 level. As of the end of regular trading, the spot price was $1,341.90 for a gain of $8.90 on the day. The Kitco Gold Index attributed -$3.50 to predominant selling and +$12.40 to a weakening greenback.
The recovery was ascribed to a improving sentiment as prompted by the Egyptian turmoil and gains in the holdings of the SPDR Gold Shares trust. No mention was made of the U.S. Dollar's continuing troubles as an influence on gold's recovery. In contradistinction to gold, as implied by the Kitco Gold Index attributions, the greenback has not seen any lasting Egypt-related boost; it's actually worse off than it was before the crisis. Gold, on the other hand, is much better.
The metal's six-month chart, from Stockcharts.com, shows a short-term U-shaped bottoming that was punctuated by last Thursday's plummet:
It's now evident that the chart's improving. The Moving Average Convergence-Divergence lines at the bottom of the chart are still in a bearish configuration, with the black line below the red line, but the gap between them is narrowing. It was a brave soul who bought some gold late Thursday or early Friday, but whoever did so now looks prescient. [Confession: I nearly did myself, with a credit card at the APMEX Website, but I deemed debt-prudence to be the better part of valour.]
Gold's recovery, needless to say, has not been shared by the greenback. The U.S. Dollar Index, after bouncing around between 77.325 and 77.55 early this morning, tumbled through the lower level and didn't decelerate until bouncing off 77.15. After that rest stop, it continued declining until it got to slightly below 77. Its decline done, the Index spent most of the afternoon fluctuating in a ragged range between 77 and 77.05. As of 5:30, it was at 77.035.
Its own six-month chart, also from Stockcharts.com, makes its latest decline more than usually evident:
Today's drop is close to being a downward gap. It managed to push the RSI number, found at the top of the chart, below the oversold level of 30. For the first time since October 18th, the Index is in a fully oversold position.
It's also a little more than a point away from a new six-month low. 77 has proven to be a potent support level in the past, so the Index may halt at this level or even bounce up, but that new low is looming. Needless to say, the chart is bearish.
It makes for quite a contrast to gold, which looks like it's picking upward steam again. It being able to shake off unexpectedly good economic news, as it has, suggests the recovery trade is ebbing. Perhaps gold players have their eye on future inflation over the hill; perhaps the optimism trade has simply run its course for now. A return to a divergence between gold and the greenback suggests a post-crisis atmosphere, and bodes well for gold as long as the U.S. dollar's being beaten down. Although the returns aren't in yet, last Thursday's plummet may well have been the season's capitulation low. If not, then gold's in a stronger techncial position than it once was - so the next plummet may well be the last one.
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