Gold Sails Above $1,380

Despite $1,380 being a resistance level, gold's movement above it was fairly smooth. After getting stuck at that level in overnight trading, the metal rose above it with the biggest downward bobble caused by the Philadelphia Fed's unexpectedly positive index number released at 10 AM ET. The Consumer Price Index number for January was released at 8:30, showing an above-expected rise of 0.4% raw and 0.2% core, but the gold market didn't react that quickly. Perhaps the cumulative impact of that number and a worse-than-expected initial jobless claims number added a bullish undertow that got the metal close to $1,385 at the end, and it sporting a close to double-digit gain.

Gold started the regular trading session stuck at around $1,380. Moving up a few dollars a little after the inflation and jobless-claims data were released, the metal sunk back to hug $1,381. The spill caused by the Philly Fed data took it down to $1,378, but it recovered and glided up to $1,384 before sinking back a dollar. The rest of the day saw the metal inch forward to above $1,385 before floating backwards to as low as $1,383. Another last-minute advance gave the spot price a closing value of $1,384.60 for a gain of $9.00 on the day. The Kitco Gold Index split the gain into +$3.90 due to predominant buying and +$5.10 due to a weakening greenback.

A Wall Street Journal article credited technical buying to gold's rise today. Given its stealth, any such buying would have had to have been deliberately decided upon: no automatic or reflexive buys. The fading of the greenback likely had something to do with those decisions.

Gold's six-month chart, from Stockcharts.com, shows its steadily continuing advance:



As is evident from the chart, gold had gone beyond its January 19th short-term high and is closing in on its January 13th high. Making that latter high would send a clear technical signal, as that latter high was the first after gold's plummet at the beginning of the year. There is a parallel to February last year, after the seasonal low of Feb 4th '10 was made, when gold completely recovered from a shock plummet only to meander for more than a month. This year's recovery is slower and more deliberate, but there's a solidity to it because its rise has been taking place in a time when attention has shifted from it. Gold was only hindered by the recovery trade, not driven down into steep correction territory. Still, if seasonal prcedent prevails, the metal will get stuck again later in the winter.

The U.S. Dollar Index's drop this morning paralleled yesterday morning's. Briefly rallying on the inflation and jobless claims data, it turned around and sunk to around its support level of 78. Again, the fluctuations diminished as the afternoon wore on, leaving the Index moving around in a narrow range between 77.95 and 78.0. As of 5:30, it was at 77.98.

Its own six-month chart, also from Stockcharts.com, shows a steady decline from its recent short-term high of almost 79:



Today marks the third day in a row of declines for the Index. It bottomed out near its earler short-term high, and may be due for a turnaround soon. Its advance has been lumbering, and hasn't erased much of last month's decline. Unlike previous advances, this one has been slow. This hesitancy actually bodes well for gold, which has shifted into playing off against the greenback.

There are some signs that Asian buyers are becoming used to higher prices. Although gold-bar premiums are well below what they once were, buyers' absence is beginning to fade. There are signs, both from those buyers and investors in regular time, that gold has climbed a wall of disbelief. I can't say how long its climb will continue, but its deliberateness is impressive after last month's washout.