Monday, April 4, 2011

After Drifting Downwards, Gold Closes With Decent Gain

There wasn't much additional news from the usual crisis spots, and oil drifted along for most of the day. Gold, after feeding off some optimism generated by a rise in the Eurozone PPI in February at 6.6% from a year earlier, touched $1,440.00 exactly just before regular trading started. Although fading when regular trading began, and doing so for most of the morning, it remained in the plus column all through regular trading and closed with a decent gain.

The first part of gold's slipback was irregular, and took the metal down to $1,435. Stuck there in late morning, it stumbled at 11:30 AM ET and dropped to $1,430. Instead of a snapback, the recovery was fairly laboured and gold never saw $1,435 for the rest of the day. But, it didn't see $1,431 either.

An attempt to get back to $1,435 petered out a dollar short, and the metal slipped back but to a higher bottom. After 1:30, it spent the rest of the session climbing rather evenly but it was slow and trundling. As of the close, the spot price was $1,434.50 for a gain of $5.60 on the day. The Kitco Gold Index attributed +$6.60 to predominant buying and -$1.00 to a strengthening of the greenback.

Gold's six-month chart, from, shows it closing at a higher price than yesterday's open:

In other words, it entirely reversed its decline from last Friday's tumble-inducing non-farm payrolls report. More quickly than from its previous tumble, the metal put another sharp decline to bed. Despite enthusiasm being reported amongst short-term gold timers, traders are skeptical of this current rallylet and most seem to be convinced that gold will keep consolidating. In this case, optimists will only be vindicated by proof. Only a new record high that's not taken away by yet another slide will convince traders that the consolidation period is over. In absence of that breakout, gold's sideways phase will continue. Of interest is how the metal will react to the next European Central Bank Governing Council meeting three days from now. A rate hike is widely expected, but gold may tumble temporarily again if the hike comes through. If no hike, it may spike up.

Turning to the U.S. Dollar Index, it had a dull day but it got a bit of a late-morning boost shortly before gold stumbled. Jumping from below 75.75 to above 75.95, it pulled back but settled at a higher level than that low. Another run crested at 1:30, again coinciding with a drop in gold. This one got close to 76.0, but it reversed into a pullback. In later afternoon, the Index settled around 75.9. As of 5:30, it was still creeping along at exactly 75.90.

Its own six-month chart, also from, shows a slight rise in the overall framework of it getting stuck:

The Index has put aside its recent habit of declining swiftly, and it's also put behind its sharp snapbacks. A recent enthusiastic run-up on that same payrolls report was quickly reversed. The chart suggests it's going to continue rambling without much direction for the nonce, although an ECB rate hike on April 7th would snap it down and perhaps keep it down. Until then, there are no real drivers to move it sustainably in one direction or another. It should continue drifting for the next couple of days.

The gain gold notched up today is lesser than the double-digit gain it sported as regular trading began, but the slip-back in today's session was reassuring for being fairly mild. In essence, gold is back to where it was before its short-lived spurt from the Eurozone PPI report. It kept its gains from before that 7 AM rise. There shouldn't be much excitement in tonight's trading, which means gold shouldn't face any serious threat.


  1. Hey Daniel, are you currently trading?

  2. Hey yourself, Trin,

    No, I'm just commenting. Yours is going fine, isn't it?