Instead, it was a day for the turmoil story. After slumping to $1,415 before regular trading opened, gold at first rallied hesitantly but then more confidently as the Libyan turmoil took hold on the market's imagination again. Gold managed to recover from a mid-afternoon slump to end the week near a new daily high. Had it not been for a drop at the very end, it would have closed at the daily high of $1,434.60. Instead, it closed with close to a twenty-dollar rise. For the week, the metal notched up another decent gain: $23.20, or 1.65%.
The gold market seemed to have seized upon the falling unemployment rate initially, despite the job gains being less than the 200,000 threshold for concern. After breaking above $1,420, the metal first floundered and then slid back to $1,416 by 8:50 AM ET. Likely prompted by selling on the news, it didn't make for a good start to what would be a good day.
Having shaken off the drop, the metal rallied smartly until reaching $1,428 by 9:45. A tumble by the U.S. dollar encouraged that run-up. Then pulling back, once the greenback stopped sliding, it resumed its advance up to $1,432. Until mid-afternoon, the metal largely stayed in a $1,428-$1,432 range while waiting to see if more uproar came. Then pulling back a little, to $1,426, it gathered its strength again and rallied in late afternoon. Despite that last-minute pullback, the spot price still ended the week at $1,432.80 for a gain of $17.50 on the day. The Kitco Gold Index split the gain into +$16.50 for predominant buying and +$1.00 for a weakening greenback.
Gold's six-month chart, from Stockcharts.com, shows yesterday's plummet mostly being reversed today:
It still closed lower than it did two days ago, which is less than what would be expected from a bull-run fall out of bed, but today's recovery was still fairly strong. It reinforced gold's current uptrend, while yesterday's tumble made it clear what gold is rallying on. The metal is stil close to overbought, and the chart shows little reason to question its uptrend. Still, if Gadaffi falls, so will gold as relief selling comes into play.
Turning to the U.S. Dollar Index, it went through odd gyrations at the time when the payrolls data were released. At first plunging, it reversed course and notched a peak above 76.6. Then, influenced by the turmoil, it had another one of those bad mornings. By 10:10, it has sunk to as low as 76.265. Its morning plop over then, it partially recovered to over 76.45. In the afternoon, it settled into a range between 76.355 and 76.415 in which it ended the week. At the end of trading, it closed at 76.38.
Its own six-month chart, also from Stockcharts.com, shows its decline getting more steady:
Today's drop wasn't large by magnitude, but it was unambiguous in direction. Today marks the third day in a row that the Index closed with a loss. Its chart looks dismal, and its Relative Strength Index is quite close to outright oversold. It hasn't approached 76.0, yet, but it's getting closer to that support level.
Gold, despite yesterday's tumble, ended up having a good week. As the Libyan revolt keeps simmering, the metal is feeding off the economic gloom caused by rising oil prices. In a sense, oil is making the optimistic data from the recent past obsolete - or at least questionable. It's also aiding in revealing inflation already baked in the cake. Gold's immediate stumbling block will be a resolution of the Libyan crisis, but its more distant stumbling block is already in view. The European Central Bank is moving to hawkishness, and the Fed is inching its way there. Since central banks are typically too little and too late, any downturn caused by rate hikes will likely be a buying opportunity once the panic drains away. It's not here yet, but it's on the distant horizon.
In closing, I'd like to wish you a good weekend - with hopes it's not too wet a one.
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