Thursday, March 31, 2011

Gold, Although Off From Daily Highs, Closes With Decent Gain

March is over, and so is the quarter. Gold managed to seal a tenth consecutive quarterly gain with a decent gain on the day. Its gains were accompanied by WTI crude oil closing its own pit session at a two-and-a-half year peak of $106.72. In Portugal, the lack of support for the second austerity package led to Parliament being dissolved and a general election being called for June 5th. Also influencing gold from the Eurocrisis arena was the result of Irish bank stress tests, which concluded that Irish banks need 24 billion more Euros in capital to stay solvent in assumed turbulent financial weather. The Middle East trouble spots are still bubling over but no outright boiling erupted today.

Gold started off regular trading muddling around just above $1,430, but jumped to $1,438 at 8:50 AM ET. Crude's rise influenced that jump, as higher crude evinces higher inflation. Although making a later run that peaked at $1,440.80, it spent the morning muddling around in the high 1430s. A brief slip at 12:20 was reversed quickly.

It stayed in the high 1430s zone until well after the electronic-trading hitch began. The pit session ended with a new record close of $1,438.90, even though the spot interday high is more than ten dollars over that figure. Gold's slide between 2:00 and 2:30 was largely recovered from, but the metal turned downwards again a little before the U.S. Dollar Index jumped up. Its slump continued for the rest of the day, and left the metal well below the high 1430s that it spent most of regular trading in. As of the close, the spot price was about where it was at the start of regular trading: $1,431.80, for a still substantial gain of +$8.00 on the day. The Kitco Gold Index split the gain into +$6.90 for predominant buying and +$1.30 for a weakening greenback.

Gold's six-month chart, from, shows it touching $1,440 but dropping off:

The rule for gold's Relative Strength Index (RSI), found at the top of its chart, held up again. When a bullish wind is at the metal's back, it tends to regain its footing when the RSI line gets at the 50 neutral level. Its latest slump didn't quite pull the RSI down to 50, but the reversal came all the same. Gold's still well below its record high, but the chart pattern looks encouraging. It made a slightly higher high followed by a much higher low. It's on track to set a new interday record high.

As for the U.S. Dollar Index, a late-afternoon jump didn't keep it from showing a loss on the day - but it managed to eliminate much of its loss as of this morning. Reaching as low as 75.7 a little before its own pit session started, the Index rallied but got stopped at 75.95. That level would hold it down until 4:00. After another unsuccessful try, it settled down around 75.85 before jumping and trying to surmount 76.15. Not doing so, its pullback still left it around 76.0. As of 5:30, it was marking time at exactly 76.00.

Its own six-month chart, also from, shows today's decline as fairly small:

Despite the bulge of the lower wick of today's candlestick, indicating how low it sunk over the last twenty-four hours, the Index is continuing to slump at a fairly leisurely pace overall. It has less than a point to go before making a new fifteen-month low, but its action so far suggests it won't slide through that new low soon. Instead, it may bounce and muddle around. One driver that would push it down to a new low would be a rate hike by the European Central Bank. The next meeting takes place April 7th: if the expected rate hike comes, it should strengthen the Euro to the point where the greenback is pushed to that new low.

Gold ended the quarter with a creditable record today: a new closing high for the pit session. It's only eighteen dollars away from making a new interday high; at its height today, it was less than ten away. Things are becoming salubrious for the metal again. Even if today's gains are whittled away in the overnight session, it's unlikely that gold will revist $1,420 even at its low - let alone $1,410.

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