Gold Declining Still, Though At Lesser Rate

After taking a rest in a trading range last night, gold kept falling this morning. The $1,060-$1,065 trading range was pushed up against on the upside as of 7:30 PM ET last night, and again very early this morning, but held until it was successfully broken on the downside at about 3:30 AM. A sharp fall that took the metal down to $1047.60. The range was replaced by a lower one, as gold began to drift between $1,050 and $1,055. As of 8:04 AM ET, and before the employment data release, spot gold was down $10.10 on the day. The Kitco Gold Index has $7.20 of that decline due to predominant selling, and $2.90 due to U.S. dollar strength.

As for the greenback, it keeps on going up. The U.S. Dollar Index managed to best the 80 level just before 8 PM ET, shooting up to 80.28 within fifteen minutes. That breakthrough was met with a particla pullback as the Index settled in to a range bordered by about 80.07 and 80.15. The second upsurge began at 2: 40 AM and went for more than an hour, pushing the Index all the way up to 80.43 by 3:35 AM ET. (Shortly afterwards, as noted above, gold was hit.) Another, choppier, pullback followed that took the Index down to 80.10. Since then, it's rallied somewhat to reach 80.25 as of 8:16 AM.

This chart doesn't say it all, but comes close to doing so:



The RSI index shows that the greenback's gone back to oversold levels. I note that subsequent oversold levels have accompanied higher highs.

Perhaps incredibly, the 60-day chart of the Kitco Gold Index shows that gold in terms of the index made a double bottom yesterday, making for a counterpoint to the busted doble bottom in raw terms:




A Bloomberg report, webbed by Business Week, is headlined "Gold Declines to Three-Month Low in London as Dollar Rallies." The rout was, of course, ascribed to the greenback:

“People are very uncomfortable with the euro,” said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “If liquidation continues,” bullion may retreat to around $1,025 an ounce, he said.

Other experts quoted remained optimistic, but none of them used the word "capitulation."

Both that report and a Reuters one mentioned risk aversion as another cause. The first expert quoted in this report was also bearish near-term:

"It looks like the next few days are going to see further weakness in gold and further strength in the dollar," said Standard Chartered analyst Dan Smith. "We see $1,020 an ounce as the next point to look for."

Both reports also mentioned that commodities were down pretty much across the board. The Reuters piece ended with some handicapping of the jobs report and this characterization of recent gold market:

Standard Chartered's Smith said the growing risk aversion permeating the markets meant the jobless figures would have to be much better than expected to change the direction of the market.

"In the last few days we have seen anything that is vaguely negative leapt on, and anything positive generally being ignored," he said. "The numbers will have to be extremely good to make any difference to the current market mood."

The non-farm payroll report was slightly worse than expected: a loss of 20,000 instead of the expected 10,000. Revision of December's number added to the losses that month: 150,000 instead of the reported 85,000. But, the unemployment rate was lower: 9.7%, below an expected 10.1%.

Just prior to the announcement, spot gold had crept up to $1,057.40. The U.S. dollar blipped up to 80.303 at the time of the release, but plopped down later; as of 8:58 AM ET, the U.S. Dollar Index was 79.99. Spot gold climbed up to $1,061.60.