The gold-market aftermath of the weekend explosion at that Japanese nuclear power plant caught in the tsunami was less than the $1,435 spike at the height of the buying rush last night, but enough remained despite some fluctuations to leave gold at the end of regular trading with almost a double-digit gain. The metal was pushed up near the end of the electronic-trading hitch by news of a second explosion at that same plant. As a result, the radioactive fuel rods were exposed for about two hours due to cooling fluid being blocked from flowing into the reactor. As is the case with disasters of this type, government assurances and alarmist exaggerations are feeding off each other.
Gold sunk a little after regular trading began, but reversed after 8:30 AM ET as it climbed up above $1,430. Losing steam, it double-topped just below $1,431 and then went on another morning slide. This one, starting just after 10:00, lasted almost an hour and took gold down to just under $1,422. Prompted by little other than profit-taking, it accompanied a mild recovery in the greenback. Gold then recovered, a half hour before the U.S. Dollar Index slid. Having its upward momentum knocked out by that nine-dollar slide, the metal climbed back only moderately.
It fell back to $1,422 a little after 12:30. Having borne the brunt of a second tumble, its subsequent advance was slower than the last one. Gold barely got to $1,427 before it double-topped and fell again. Coming to a halt at 4:00, it meandered around $1,424 until news of that second explosion accelerated it upwards from a small gain to a sizable one. As of the close, the spot price was $1,428.80 for a gain of $9.20 on the day. The Kitco Gold Index split the gain into +$2.10 for predominant buying and +$7.10 for a weakening greenback.
Gold's six-month chart, from Stockcharts.com, shows it shaking off Thursday's plummet for a second trading day in a row:
It did take another disaster to push gold back up above $1,425, and such disasters can't be counted on to keep saving the metal from a real pullback. Gold's Moving Average Convergence-Divergence (MACD) lines, found at the bottom of its chart, made a bearish cross today in spite of the gain. Over the last several months, bearish crosses have come after a serious plummet; they've been too late for a reliable get-out-of-Dodge signal. This time may be different. Optimism is back, and there are widely-held expectations that gold will continue marching up to $1,500. The market may have set the metal up for a real pullback once the fear-inducing news stops coming. For accumulators, such a pullback would present a buying opportunity.
As for the U.S. Dollar Index, its decline in today's regular trading was mostly confined to the morning and was fairly mild. The bulk of the damage was done before regular trading. Sliding from around 76.55 to about 76.35 this morning, it steadied up and drifted in the afternoon. As of 5:30, it was at 76.345.
Its own six-month chart, also from Stockcharts.com, shows today's continuation of Friday's drop as being pretty deep:
Thanks to the Japan disaster, the Index has been driven down close to its March 7th low. Its secondary reaction didn't last long. The Index's own MACD lines made a bearish cross today, only two trading days after its bullish cross. The decline has been sudden, but it also has been disaster-induced. It wouldn't surprise me to see a holding pattern a little above 76.0. If the Index decisively breaches that level, however, it would be well-positioned for a take-out of its fifteen-month low made last November 4th. If it does, then any downturn pressure on gold will likely ease off. As the Middle Eastern-North African turmoil and the Japan disaster show, the greenback doesn't make for much of a safe haven nowadays.
Gold won't likely make a new record anytime soon, unless another disaster gives it the fuel to break $1,445.90. It's still in a pretty good position, though; its early-year pullback was milder than most and its time spent consolidating has been shorter than usual. Disaster and turmoil have been responsible for its oomph, but such boosts do highlight gold's popularity as a safe haven. How it performs tonight depends on further trouble in Japan.