Gold Turns Up After

After a Friday drop that took gold's price within speaking range of its December interday low, the price of the metal turned up. Early morning trading saw $1,100 bested; as of about 5:45 AM ET, $1,105 was almost reached. Starting just before 8 AM ET, though, gold fell below $1,100 and even below $1,095 before recovering. The Kitco Gold Index, even after the spill, credited $4.40 of the rise to predominant buying as of 8:30 AM.

The greenback hasn't moved much since the start of weekly trading, but what movement there's been has been up. As of 8:59, the U.S. Dollar Index jumped up as high as 78.338 before retracing somewhat.

As this Globe and Mail report recounts, the push-up in gold is likely due to bargain-hunting.

“[Prices] are recovering a bit,” said Eugen Weinberg, an analyst at Commerzbank. “The slump of the last week might be considered by some bargain hunters as being an excessive one.

“Some see in gold protection going forward, if the correction on equity markets continues ... but also there is some physical buying at the current levels after the strong decreases.”

Later, though, the article also says that Indian gold buying was "in limited quantities" even below $1,100.

This Bloomberg report also mentions bargain-hunting, but starts off with attributing the rise to expectations that the U.S. dollar will continue to fall. (As noted above, those expectations have been confounded for the moment.) Later in the article, it's hinted that platinum demand has cut into investment demand for gold.



The gold-at-a-discount indicator closed last Friday at 10.20, and it sunk interday to below 10.10. As this post explains, I'm now presenting it as an item of reader interest. A closer look at it shows that it has a tendency to lag when the gold market turns up. Presumably, that's because GLD buyers push the ETF up to a greater degree than gold traders push gold itself up when the metal begins rising on a sustained basis.


This daily chart of the U.S. dollar, courtesy of Stockcharts.com, doesn't given much ground for gold-bull optimism:



As can be seen, there's now a clear pattern of higher highs and higher lows - coming from a time when the U.S. dollar was in the doghouse. Granted that much of the rise since early December corrected an in-retrospect undervaluation of the greenback, and that the U.S. dollar is going to need some more favorable fundamentals before rallying further. The chart, though, shows that this is not the time to hope for a greenback bear market.

The economic data released suggests the U.S. recovery is still in slow gear. Of interest in the latests National Association for Business Economics survey is that members are reporting that credit, although still tight, is loosening. Its release had little or no effect on gold, except perhaps to arrest the decline. As of 9 AM ET, spot gold was at $1,095.80.