It started off breaking through $1,420, a resistance level which it's been stuck below for a week. Although breaking through just before 8:00, it didn't rally with any conviction afterwards. Instead, it dawdled around $1,420 as traders waited to hear what Bernanke had to say. Stepping backwards just before regular trading began, the metal touched $1,418 before moving forward to $1,420 again. A subsequent rally ended with another retest of $1,420, followed by shuffling up to the low 1420s in mid-morning.
Then, a combination of the stagflation story, no threatening words from Ben Bernanke and the falling stock market got gold marching upwards. By early afternoon, the metal took a break and dawdled between $1,428 and $1,430. The subsequent advance was more irregular, with more frequent steps backwards, but it did make that new record before taking another break and stepping back a little. At the close, the spot price was $1,433.20 for a gain of $22.00 on the day. The Kitco Gold Index attributed +$24.70 to predominant buying and -$2.70 to a strengthening greenback.
Gold's six-month chart, from Stockcharts.com, shows a definite breakout from its short-term range up to its new record:
Since there hasn't been any meaningful pullback, today's record counts as a continuation of the uptrend that began with January 27th's low. In the last month and a bit, gold has run the gamut from a low not seen since the beginning of October to a high not seen at all until today. Happily, the rally has run a gamut of skepticism (including mine) so there's no mania associated with it. I have to say, its run is close to unprecedented in this ten-year bull market in terms of comsolidation length. Normally, when the metal's made a run of last summer and fall's magnitude, it pulls back a fair bit and then gets stuck for several months. This time, the pullback was minor and the consolidation period was little more than a few months. Gold's bull market seems to be accelerating. The inflation story is already making the rounds. Should this new record precede a string of gains, should gold keep advancing up to (say) $1,500, we may well be at the cusp of the blow-off topping process. If so, the metal could advance to seldomly dreamed of heights before imploding.
The U.S. Dollar Index managed to eke out a gain on the day. and even advance a little above 77.0, but its advance was confined to late morning and early afternoon; it petered out at 77.1. It managed to pick up some safe-haven demand itself, but its advance was minor compared to gold. After being blocked at 77.1, it still stayed above 77.0 as a slightly downward drift replaced the rally. As of 5:30, it was at 77.02.
Its own six-month chart, also from Stockcharts.com, shows today's gain not making up for yesterday's loss:
Not following through with a steady decline after breaking down at 77.0, the Index has muddied along instead. Perhaps some safe-haven demand explains why, but its fall below 77 didn't have much conviction. Although still in a bear trend, the Index looks like it's going to continue to sag and not speed downhill.
Given the fright that was going viral at the end of January, a new record on the first day of March is a pleasant surprise. Bullishness is coming back, which is to be expected given gold's nearly 10% gain in a little more than a month. There's a slow but definite change in the story, though. The market is latching onto what's always been the big story for gold: inflation. So far, there's little sign of inflation in the U.S. official statistics, although there's a lot of anecdotal evidence shwoing the beast waking up. Should inflation ramp up in the official measures, it may well be off to the races for gold. Silver's outperforming it, which is typical for the gray metal in third stages of gold bull markets. The pathway for an all-out blowoff top is being set...
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