Friday, April 15, 2011

Gold Climbs To New Record; In Sight Of $1,500

Again, the first stretch of the pit session proved to be misleading. Shaking off an early slump, gold managed to climb to yet another record high. Today's new record surmounted the last one by more than ten dollars. Helped by a jump in WTI crude oil, the metal rallied despite the greenback showing a little strength overall. Its new record of $1,489.30 is little more than ten dollars away from the magic $1,500. Gold managed to close only a little below that record. So, needless to say, it chalked up a decent weekly gain: $11.40, or 0.772%. That for a week's stretch that saw two new Friday records being made by the metal.

Initially, gold slumped. The March CPI figure, showing a 0.5% raw rise and a less-than-expected 0.1% rise in the core rate, didn't provide much grist for the metal to rise; instead the greenback drew strength from the news. The metal slumped to just above $1,472 and meandered up to $1,476 afterwards. The strong industrial-production rise of 0.8% for March didn't help gold much; nor did a rise in consumer sentiment for April. However, despite the optimistic tone the latter report added to the recovery, gold took off at its release after double-bottoming at $1,473.

The rally got stuck at $1,480, and hesitated later, but continued until a little after noon. By 12:30, gold was around $1,487. Sinking down to a $1,484-$1,486 range, the metal had enough energy to make its new record at 2:15 PM ET. Then sliding back, it came to a rest in late afternoon and glided to the end in a higher range. At the end of the week, the spot price was $1,486.40 for a gain of $10.60 on the day. The Kitco Gold Index attributed +$13.25 to predominant buying and -$2.65 to a strengthening of the greenback.

Gold's six-month chart, from, shows yesterday's climb extending today:

Because of today's jump, gold's Relative Strength Index (found at the top of its chart) is almost back to an outright overbought position. Needless to say, the metal managed to shake off its funk from early this week. Since gold's now rallying smartly in record territory, the next barrier is psychological. Despite the magic of the $1,500 figure, its near-ubiquity is going to invite some profit-taking once gold gets there. It's an easy bet that gold will touch $1,500 next week, but the metal's going to have some difficulty fording above that level unless the usual profit-takers decide to stand aside and watch instead.

As for the U.S. Dollar Index, it showed a little strength on the good news about the U.S. economy but it was frustrated at 75.0. Peaking just a smidgen above that level right after 9:30, it turned around and slowly descended to the 74.75 level. Although the slide-back was slow, with one recovery climb, the Index showed enough weakness to help gold out. Double-bottoming at 74.75, it spent most of the afternoon lumbering up to a little below 74.9 before losing strength and sliding back. At the end of the week, it came to rest at 74.82.

Its own six-month chart, also from, shows it lacking rally power but also showing some resilience to further falls:

In short, the Index is stuck. Although the overall near-term trend is downward, the gentleness of its slide makes for a marked contrast with its more skiddish tumbles in the recent past. The main cushioner of the Index's declines is the Euro: despite a few days of trying, it can't get above US$1.45. The greenback is having its troubles, but so is the Euro. Unless the European currency can break above $1.45, the Index is going to continue langishing instead of sliding.

For the second week in a row, gold ended on a high note that featured another record high being made. $1,500 is so close, it almost looms. With nothing except profit-taking to block the metal, $1,500 will be tested next week. Better yet, there's still a wall of worry out there: little signs of an outright mania can be found. It's weeks like this that bring to mind, albeit tentatively and speculatively, the even rounder figure of $2,000.

In closing, I'd like to thank you for stopping by and seeing what I've got on this blog. Have a great weekend, and enjoy the glow while it lasts.

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