$1,100 Resistance Level Still Holding

After making a brief run at $1,100 yesterday just before noon, ET, gold fell bak a little until last night. Another run at the $1,100 resistance level was then made, which topped that price for about an hour. Gold then entered a decline that lasted until about 3:30 AM ET, and which carried the price down to $1,090.40. Then, gold ascended to the middle of the $1,090-$1,100 channel before falling again. According to the Kitco Gold Index, gold's decline has been largely due to "predominant selling."

The reason why gold went from above its channel to nearly the bottom, can be found in the daily chart of the U.S. Dollar Index. Even though a reversal of the Index's early morning gain did leave gold slightly lower all told, a greenback run up to 78.702 did mirror the slide. Interestingly, gold bottomed before the U.S Dollar Index's bull run ended. As of 8:23 AM ET, the Index was below 78.4 and yesterday's close.

A report webbed by the Daily Telegraph Online has as its header a chart of gold's purchasing power, provided by the World Gold Council:



This chart says that the purchasing power of gold only sunk significantly below its 17th-19th century norm in the 1930s and 1960s. Since the latter decade, it's always been above that norm. Right now, the purchasing power of gold is higher than it was shortly after Queen Elizabeth I ascended the throne.

The rest of the story ascribed the fall of the gold price to the rising U.S. dollar: a quote from an expert echoes Dennis Gartman:

"The dollar is stronger today, and that is keeping precious under pressure," said David Thurtell, an analyst at Citigroup. "Also, a little bit of de-risking in there too."

Also included in the report, along with a quote from two other experts, is the note that SPDR Gold Trust holdings have not changed at all in a week.

The Bloomberg daily report on gold carries much the same message. The first expert quoted therein expresses conditional hope about the upcoming Fed meeting:

“Investor interest may come back after the Fed assures the markets that they won’t raise interest rates for a considerable period of time and this reignites a decline in the dollar,” said Yu Kyung Kyu, a trader with Eugene Investment & Futures Co. in Seoul.

One interesting fact to note, also mentioned by the latter story, is the fact that the SPDR Gold Trust (GLD) holdings haven't changed at all in the past week - even though the gold price has been scraping at its month low. There hasn't been any buying through the Trust at these levels, but there hasn't been any liquidation either.

The gold:GLD ratio, as computed by a Stockcharts.com ratio chart, closed at 10.20 and managed to get as low as 10.09, the same daily low it touched on Friday. For the last few days, it's been centered around 10.15 or so; it's been pretty sedate. This ratio is presented as an item of reader interest.

Also of interest is this chart of the U.S. Dollar, also courtesy of Stockcharts.com:



The greenback today came just shy of its four-month high set last Thursday. The MACD indicator on the bottom of the chart is still in bullish-interpretation mode, even if the divergence of the black line over the red line is less than the level it was at as of December 10th or so. Unlike back then, there's been no rocket-up of the Index this month.

A little less than an hour after the New York market opened, gold has fallen down to the bottom of its channel as the grenback has recovered: the U.S. dollar index has climbed above 78.5. As of the time of this post, spot gold's recovered slightly to reach $1,090.50.