Gold Prices Recover

Regular trading for the metal didn't begin all that propitiously. From the open until 9:20 AM ET, gold fluctuated around $1,139 as a slight downward bias turned into a slight upward bias. Then, starting at that time, the metal put on a quick five dollars an ounce. Making a double top a little above $1,144, gold sunk back to $1,141 by 10:35. A subsequent uptick turned into a relief rally as the metal sunk back to the $1,141 level and below As of 11:38 AM ET, the spot price was $1,139.10 for a small loss of $1.30 on the day. The Kitco Gold Index attributed +$2.10 change due to predominant buying and a -$3.40 change due to a strengthening greenback.

The U.S. Dollar Index has strengthened this morning. After pulling back to around 81.13 by 9:30, and fluctuating just above that level for the next half hour, the Index pulled back up. A rise to a little above 81.2 was halted by a pullback to 81.17, but that pullback prefaced a rally that took it up to 81.31. That rally helped take the wind out of gold's sails from 10:48 to 11:30. As of 11:40, the Index was at 81.29.

So far, things don't look that good for gold - but, given the U.S. Dollar Index's performance, things haven't been that bad for the metal. Although not a sure thing, there's a possibility that gold will eke out a gain at the end of today's session.


Update: Early afternoon action was more positive than I had expected. Just before 1:00 PM ET, gold managed to get above $1,150.

It sinking below $1,140 just before 11:30 marked the bottom of the late-morning session. After hanging around that level until 11:45, gold went on a run that lasted almost an hour and put more than ten dollars on its price. Since that top, the metal's been hovering around $1,148 and looking as if its run upwards was spent. As of 1:42, the spot price was $1,147.40 for a gain of $7.00 on the day. The Kitco Gold Index had a change of +$8.90 due to predominant buying and -$2.00 due to a strengthening greenback.

Although still stronger on the day, the U.S. Dollar Index did weaken somewhat; that helped kick off the noon rally in gold. After peaking at 81.31 as of 11:35, the Index slid down slowly at first but picked up speed. By 12:45, it was below 81.2. Since that time, it halted its decline and has been in a trading range between 81.15 and 81.2. As of 1:43, it was at 81.19.

There's a chance that gold will slide down during the rest of the afternoon session, but a gain on the day looks all-but assured. Of some comfort is the fact that the major mid-session move was upwards.


Update 2: The gain did come in - not as much as it had been at the high, but still fairly solid. The price did descend somewhat in the post-pit part of the regualr session, but not by that much.

Gold continued to hover around $1,148 until a decline got rolling at 2:10 PM ET. Taking the price to just above $1,145, it ended at 2:50. From there, it drifted up to the $1,146-$1,148 range in which it stayed until the end of the session. At the close, spot gold was at $1,146.20 for a gain of $5.80 on the day. The Kitco Gold Index assigned a +$8.30 change on the day to the predominant-buying category and a -$2.50 change to the strengthening-greenback category.

The U.S. Dollar Index didn't change all that much during the rest of the afternoon session. An attempted rally starting at 2:05 PM didn't get up above 81.25. That rally thwarted, the Index fell all the way down to a little below 81.15 by 3:20. A subsequent gentle climb got it up to almost 81.25 again, but two attempts to breach that level in the late afternoon didn't succeed. As of 5:30 PM, the Index was at 81.21.

Its daily chart, from Stockcharts.com, shows the resistance at 81 finally overcome:



The chart also shows something that's a record for the last year: five consecutive up days. Although the absolute amount of the gains isn't very impressive as compared with the stronger action earlier this year, the consistency of them says something about the greenback. In terms of interday levels, the five-day streak went from 80 to well above 81.

But not to 81.5, at least not yet. Despite that record, the Index is still in indeterminate territory. Its streak would be even more impressive if it got up to 81.5 tomorrow. As I noted yesterday, the rally looked as if it were cresting; today's rise was solid enough to render that opinion mistaken. The Index may have enough momentum to keep going to 81.5, or even beyond. That primarily depends upon more Eurojitters hitting the Euro market. The latest speculation is that a bailout will not be forthcoming for the Grecian government. If there is one, then the Index will sink again. More immediately, if there's no cause for worry the Index may slump tomorrrow. Even if it rises because of further speculation and worry, that rise will be on borrowed time if a bailout does ensue.

Turning to gold, I have to say that the metal put my worries yesterday to rest, as its own daily chart shows:



During yesterday's display of my own jitters, I compared gold's action up to then to two episodes in late January and early February. With today's action added, the action of the last four sessions resembles neither of them. It's possible that the uptrend will continue from these levels, although hesitantly and choppily given the U.S. Dollar Index's strength.

There's just one wrinke to the story, found at the bottom of the chart. For the second day in a row, the MACD lines there are in a bearish configuration. There have been one-day fake-outs, although all of them have been bull fake-outs, but no two-day ones. Today marks the second day of the current bearish configuration, even though it's milder than the start of the other three bear phases.

What would be best for gold would be a pause or slog upwards despite that MACD bear signal. As I've noted earlier in the year for the U.S. Dollar Index, a bear phase combined with an essentially sideways move is a bullish signal for the longer term. We may see that for gold because of safe-haven demand trickling in once the buy-greenback panic button is no longer being pushed. That's what happened the last time the Index was propelled upwards by the Eurocrisis only to sink back down. Although the greenback is still the reflex choice in any crisis, more deliberate buying of gold does kick in later. Given that pattern, there is the possibility that yesterday and today's rise may be continued in the near future. One caveat: gold's now above levels that are now considered bargain points. The higher it goes, the farther away it is from such support.

Tomorrow's session may continue to show gains for the metal; the way it's reacted after a Greece-related scare suggests a good chance that it will. Even if it doesn't, we may be in for a period where the metal essentially goes nowhere. Despite the jitters accompanying the austerity talks, there's a fairly good chance that the Grecian government will end up with some sort of aid package. That decision will take two to three weeks, but I doubt that that government will be hung out to dry. Not all Germans are opposed, and Germany's banks are hurting from the bear market in Grecian sovereign debt...