Friday, March 25, 2011

Gold, After Decent Gain, Tumbles On Stronger Greenback; Closes With Slight Loss

The prosecution of the Libya warlet is now in the hands of NATO, and the top soldier for the mission is Canadian Lt. General Charles Bouchard. The brewing civil war in Yemen has unnerved Pres. Saleh to the point where he's ready to leave office now. He would be the third ruler in the region forced out by public uproar. In Syria, temporary martial law has not deterred more protestors from hitting the streets. Despite a promise from Syrain President al-Assad to look into recognizing some human rights, troops opened fire on marchers in several cities. The region's turmoil continues. There's some worry about what will happen in U.S. ally Yemen.

All of these events, gold ignored. In essence, the metal has already discounted the turmoil. That explains why gold went from a decent gain in the morning to an outright loss after the greenback leapt up. Although the loss was pared, gold's late-afternoon momentum was not enough to eliminate the deficit on the day. For the week, thanks to earlier gains, it was up $10.50 or 0.740%.

The metal essentially marked time in the morning after rising last night. As the pit session approached, it became more volatile but still moved sideways overall. A nice boost from a downward revision of the March number of the University of Michigan - Thomson-Reuters Consumer Sentiment Index provided leverage for a nice climb to $1,438 but the effect was only temporary. By noon ET, the metal was hovering around $1,434.

Then, prompted by a leap of the U.S. Dollar Index prepared for by an uneven climb, profit-taking again entered the gold market and the metal was driven down to $1,422. The downdraft lasted a half an hour and ended at 12:45 PM. From then, a relief climb set in thanks to the metal being driven down too far. The climb's momentum petered out in later afternoon, despite a last-minute jump; gold had diffculty regaining $1,430. As of the end of the week, the spot price was $1,430.20 for a loss of $0.80 on the day. The Kitco Gold Index attributed +$8.30 to predominant buying and -$8.90 to a strengthening greenback.

Gold's six-month chart, from, shows its volatility today and its miniscule loss:

Today's profit-taking tumble was the second one in as many days. Futher confirmation of its consolidation phase comes from those drops, which have pushed gold from its new record to a fair bit below. There isn't much wrong with the chart, although the pullbacks are frustrating, but it does indictate that gold is going to keep churning around instead of resuming its climb.

Turning to the U.S. Dollar Index: it made a nice gain in early-morning trading from the 75.75 level, which was partially lost thanks to a slide-back in later morning. But, starting at 11:50, it first climbed and then leapt up in a snapback from its recent funk. By 1:05, it was at 76.28. Another slide-back to 76.15 presaged a climb that only double-topped the Index. As the week came to an end, it slide down steadily to close at 76.13.

Its own six-month chart, also from, shows its secondary upturn gaining a second wind:

Now, the Index is far from oversold. In retrospect, its recent swift slide had invited a countertrend pull-up. I admit it confounded my expectation for a further churn in the high 75s. But, I still have my doubts about the staying power of its current thrust upwards. As the chart makes clear, its overall trend is downward.

Gold did end the week with a fairly decent gain, but it's also lost its footing after setting another record this week. The current crises don't have the same rally power that they used to, and another driver has yet to make its appearance. So far, the stagflation theme has only been foreshadowed. The Fed has not even hinted at a new round of quantitiative easing yet. The only hints given indicate it won't be hawkish anytime soon. Now that the weekend's here, gold looks as if it'll continue trundling along in its low-1400s range.

In closing, I'd like to thank you for stopping by to see what I've got on this blog. Another installment of "Shade In The Made" will be up on Sunday. Have a great weekend - a warm one if you're lucky enough to have the weather co-operate.

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