The 8:30 AM ET release, showing U.S. March retail sales rising slightly lower than expected, preceded gold's daily high of $1,463.30. Buttressed by data that mildly confirms the stagflation theme, gold recovered from a drop that started just before the pit session began. Settling into a range between $1,460 and $1,462, the metal dropped to $1,458 as the equity markets opened.
The slide was reversed when two other items were released at 10:00. Job openings for February jumped up to 3.1 million, the best number since September 2008. The other numbers paint a picture of an improving economy, even though the ratio of unemployed to job openings is still more than four to one. Business inventories for the same month rose too, but less than expected: a seasonally-adjusted 0.5% instead of an expected 0.7%. Business sales only rose 0.2%.
Gold, after slumping to $1,457 just before the release of those items, turned around but only hesitantly. Failing to climb above $1459, it stumbled again before jumping up to a little above $1,460.
Then, it turned downwards and loped down to $1,451 by 12:30. The U.S. Dollar shaking off its rambles and moving upwards to 75.0 helped drive down the metal, but so did nerves. At the end of the decline, WTI crude oil was shoved down from $106.70 to $105.25 in a bout of panic selling. It recovering from the panic, and striding back up to above $107, helped gold launch its own upward march.
Unfortunately, despite the steadiness of the climb, the metal couldn't make it above $1,458. The Fed's Blue Book, released at 2:00, showed some improvement in the economy for March albeit uneven. Most of the Fed's regional governors saw or expected some supply disruptions due to the Japanese earthquake. There were reports of businesses trying to pass along increases in input prices, but only with mixed success. The gold market basically ignored the report, moving sideways when it came out.
After touching a litttle above $1,458 at 3:00, the metal descended again for another hour until reaching $1,456. Then it climbed a little but not enough to best the 3 PM peak. At the close, the spot price was $1,457.40 for a modest gain of $3.70 on the day. The Kitco Gold Index attributed +$5.40 to predominant buying and -$1.70 to a strengthening greenback.
Gold's six-month chart, from Stockcharts.com, shows a gain on the heels of its declines two days running:
Although the gain was only tepid in comparison to the previous two day's declines, the fact that gold gained after being pummeled down yesterday suggests that panic seling was to blame for yesterday's plummet. Unlike yesterday, $1,450 held today. Gold's Moving Average Convergence-Divergence lines, found at the bottom of its chart, are still in a bullish configuration. The metal has halted well above the $1,440 barrier, which it had so much trouble surmounting until last week. Should gold continue to climb, yesterday's panic will be yet another shaken-off fall out of bed. The recent breakout will be further validated.
As for the U.S. Dollar Index, it managed to shake off its early-morning droops and mount a rally in later morning. Although interrupted by a skid, it managed to ford up to slightly above 75.00 before stalling at 1:00. It hadn't done climbing until it jumped up to 75.1 on the heels of the Blue Book release; unlike gold, the Index did respond to what the Fed regional governors had to say. That spike, however, didn't last. Descending below 75.0 again, it rambled in a range between that level and 74.95 once it regained its footing. As of 5:30, it was still rambling around at 74.985.
Its own six-month chart, also from Stockcharts.com, shows it getting stuck:
After last Friday's tumble, the Index has taken a breather. Neither tumbling further or hefting up in a relief rally, it doesn't seem to know what to do. 74.5 has proven to be a potent support level, just as 75.0 has served as an adequate resistance level. The Index may surprise everyone by mounting a relief rally, but its prior rallies of that sort usually started within a day of it reaching its low. Continuing downwards looks more likely, if it's to move at all.
Gold, although volatile again today, passed another important test - one that validates its recent breakout to as high as $1477 recently. Lacking a driver, it may dawdle around some more but a serious decline has been nipped in the bud. It's gotten over the "Goldman panic." If it acts according to recent form, it will either stay stuck during overnight trading or mount a small rally in the wee hours of the morning.