Thursday, January 21, 2010

Stock Market Gets Knocked Down And Gold, Temporarily, With It

The three major averages were hammered, with declines ranging from more than 1 to over 2%. What makes this downdraft tragic for the NASDAQ is that it was up close to 0.75% around 10 AM ET; as of noon ET, it was down slightly more than 1%. Ironically, the Index of Leading Indicators jumped up 1.1% for December.

Gold has joined in the decline. $1,100 was sliced through at about 10:30 AM ET in a drop that took the price all the way down to about $1,090. After a slight recovery, gold sunk to the same level before recovering more durably.

Interestingly, the U.S. Dollar Index turned downwards too. After sinking from its daily high of 78.813, it partialy recovered to a little above 78.6. A recent move pushed it higher, to 78.64, but not to its high of the day. That move ended at about 11.45 AM; since then, the greenback shot down to 78.146 before recovering half-way towards its late-morning high.

The dollar downdraft helped abate the gold decline somewhat; $1,090 held.

Update: As of 1:30 PM ET, the recovery has not only lasted but also pushed gold up above $1,100.

After its own recovery, the U.S. Dollar Index has been drifting downwards again. 79 doesn't look like it's in the cards.

Update 2: Gold ended up drifting back down below the $1,100 level but, again, $1,090 held. Regular trading ended with spot gold at $1,093.10. The greenback stopped drifting downwards, but moved back upwards a little beyond its half-way recovery level. Once above 78.45, though, the Index pulled back to below 78.4.

This Marketwatch report attributes the drop to causes that made their impact in the morning: concerns over Chinese tightening, the drop in the Euro due to continued fiscal troubles in Greece, and Obama's proposal to clamp down on big banks. A quoted authority also noted that gold's been quite responsive to the U.S. dollar as of late:
"Gold has been very responsive to the dollar of late," said Leonard Kaplan, president of Prospector Asset Management. "As the dollar rallies, gold is going to go a lot lower."
And, of course, if the dollar doesn't rally...


  1. It's pretty much a no confidence vote I think in regard to gov policy. I don't expect the gold to remain at this level for to long, but we shall see.