A temporary respite came for crude oil buyers thanks to a rumour that Mummar Gadaffi was willing to negotiate with the Libyan rebel forces. That rumour proved to be of no avail; the fighting continues. Still, it was good enough to pull down the crude price from its highs and gold went down too. Also, the U.S. Dollar Index gained strength this morning, contrary to recent habit. That newfound strength pulled down gold, as the U.S. dollar has not been the safe haven as it was for the Eurocrisis; recently, the inverse relationship between gold and greenback is asserting itself again. Gold's fall in regular trading erased the gains it had made overnight plus a little bit; it closed with a miniscule loss since Friday's close.
It made a new record high of $1,445.90 just after 8:15 AM ET. At that same time, the U.S. Dollar Index was in the early stages of recovery from its early-morning rout. The greenback kept climbing while gold tumbled. The metal's fall ended at 9:40 with it below $1,432; by then, the Index had pulled back a little and stalled. Gold turned around and recovered most of its loss, peaking at a little above $1,440 at 10:45. Then, it turned back down on the negotiations rumour in sympathy with crude's own pullback; the Index began rising about fifteen minutes later.
The greenback's second peak came at about noon, about the same time gold hit its daily nadir of $1,427.20. At that point, the two decoupled as the currency went higher while gold recovered somewhat.
In early-mid afternoon, the metal traced out an ascending triangle with $1,436 as the ceiling. It broke through at 3:00, when a report on U.S. consumer credit for January showed growth in consumer indebtedness for the fourth straight month. January's gain was 2.5% annualized, but credit card debt declined.
Instead of resuming the rally after breaking through that $1,436 ceiling, the metal barely budged. Listless movement preceded some technical selling, which brought gold down to a $1,432-4 range. That range was broken on the downside a little before trading ended, leaving the day's end spot price at $1,431.10 for a loss of $1.70 since Friday's close. The Kitco Gold Index split the loss into -$0.40 due to predominant selling and -$1.30 due to a strengthening greenback.
Gold's six-month chart, from Stockcharts.com, shows today's candlestick as little more than a sliver:
The top of the candlestick shows the new record high made this morning. The Moving Average Convergence-Divergence lines at the bottom of the chart still show a bullish configuration, but the distance between the lines is narrowing. Gold has come far in the last five weeks, but the current rally is getting a little tired. Although making a new record, the metal has not rallied with any real enthusiasm above the $1,425 barrier. I myself expected it to set another record in regular trading today, but it didn't. The metal may continue to slog along at these levels as markets become more acclimatized to the Libyan civil war. An eruption in another trouble spot would bring some of the enthusiasm back.
Turning to the U.S. Dollar Index, its rise this morning was mostly over at noon but it had enough strength in its advance to carry over to early afternoon. Peaking at 76.54 at 2:00, it pulled back gently but still remained above 76.45 as it settled into a range between that level and 76.5. As of 5:30, it was in the middle at 76.47.
Unfortunately, Stockchart.com's six-month chart for the Index was only updated as of last Friday. So, instead of the usual, I stuck in the one-month chart which does cover today's recovery. It shows the top of today's candlestick as being a little lower than the top of yesterday's:
What this means is, the close after today's advance is a little lower than yesterday's open. The chart shows the Index taking little more than a break from its steady decline, with a durable rise above 76.5 beyond it as of now. The currency's response to that above-mentioned rumour did distract it from its current bear trend, but did not make that trend nugatory.
Gold, despite this morning's knockdown and only partial recovery, is still above the $1,425 barrier. Today looks like another breather, which will give Asian buyers some opportunity to pick up some at a slightly lower greenback price. That drop, unless added on in evening and night trading, is unlikely to shift the balance to buying - but it won't hurt the demand in the region. I wouldn't be surprised to see overall indecisivness this overnight session, although a further fall isn't out of the question.