Thursday, April 7, 2011

Gold, After Setting Another Record, Drifts Down To Miniscule Loss

Despite the U.S. Dollar Index trending down slightly, and despite WTI crude oil jumping in the afternoon to above $110/barrel, gold softened after making a new record of $1,466.20 at 9:50 AM ET. The rest of the day was spent going back and forth, with the final slide being large enough to keep gold from the gains column. Instead, the metal closed with less than a dollar loss when regular trading was over. Although the post-ECB-hike letdown wasn't much, there still was one.

Gold started off the pit session hovering, but then descending as 9 AM approached. Double-bottoming at $1,456, the metal then took off when the stock markets opened and made that new record. Unfortunately, it couldn't keep its footing and it slipped back to $1,460. The rest of the morning saw an uneven decline, with the metal's stumbling about leading to a final slip to below $1,455.

The afternoon saw it regain its footing and stride back up to $1,458, but another slip drove it below $1,455 again at 1 PM. Primed by the earlier stride, it climbed up to $1,460 which it reached at 3:00. As of that time, the consumer-credit number was released. Showing a 3.8% annualized gain for the month of February, the biggest category increase was in non-revolving credit like car loans and student debt. The increase was more than expected.

Gold ignored that report, instead drifting along at $1,460, and stepped up to $1,461 after sliding a little beforehand. Unfortunately, it slid back again as the end of the electronic-trading hitch loomed. As of the close, the spot price was $1,458.40 for a drop of $0.70 on the day. The Kitco Gold Index attributed the entire loss to predominant selling.

The metal's six-month chart, from, shows its slight post-ECB-hike loss:

The loss, being miniscule, suggests that gold's rise prior to the 25-basis-point hike fully discounted the inflationary implications. Given gold's turnaround, a further descent back to the breakout point is possible. The metal may sink to $1,445-$1,450, and in so doing give a second chance to get in for those who wish to. Unlike at the peak of a month ago, gold's Relative Strength Index (found at the top of its chart) was not above the oversold 70 level prior to it sliding back. Despite the letdown, gold has gotten enough traction to make for another upwards run once its gets over its droops.

As for the U.S. Dollar Index, its overnight gains eroded away completely in regular trading. After flailing about when the session began, and leaping up to a high of 75.82 at 9:15, the Index skidded down to 75.55 little more than an hour after that peak. Its un-frenetic reclimb peaked at a lower level, and it spent most of the afternoon in a two-stage slide that took it below 75.55. It then settled into a range between 75.52 and 75.58. As of 5:30, it was about to test the top of the range at 75.565.

Its own six-month chart, also from, shows it eking out a gain after yesterday's sizable loss:

Like gold, the Index all-but discounted the ECB rate hike. Expectations for a further decline, which I admittedly shared, were disappointed by it marking time instead. The Index failing to fall further established 75.5 as a support level. There may be some more droppage in its future, but the ECB downwards driver is now spent. As with gold, a new high in crude oil failed to affect the greenback much. There's a chance of the Index settling into a range between 75.5 and 76.5.

Although today was a letdown day, gold did manage to set a new record and kept its daily loss to a minimum. Technically, it's in a good position after made a breakthrough from the $1,445 level it's been prevented from crossing since the beginning of last month. It's still on track to put in a sizable spring advance, but that advance would likely melt away when spring turns into summer. Seasonality, unfortunately at times, happens.

No comments:

Post a Comment