Wednesday, June 30, 2010

Gold Keeps In $1,240-$1,245 Range, Mostly

The range that was established in overnight trading held during regular trading, despite a fall that took the metal down to $1,236 by 8:30 AM ET. Hovering just above that level, the metal took off at 9:30 and managed to get to $1,248.70 by 10:15. One reason for the run was the disappointing opening for the U.S. stock market; the reason for the earlier slump was the disappointing ADP private-sector jobs number. Different disappointments had different effects. Dropping back, the metal first hesitated around $1,245 and then dropped to a little below $1,240. Again, the metal went up to around $1,245; again, it dropped to $1,240. As morning turned into afternoon, the fluctuations eased. As of 1:32 PM ET, a little after the pit session ended, the spot price was $1,245.10 for a gain of $4.40 on the day. The Kitco Gold Index split the gain into +$1.50 for predominant buying and +$2.90 for a weakening greenback.

The U.S. Dollar Index largely stayed put in the morning and early-afternoon part of regular trading. It ranged between 85.8 and 86.0 from about 8:30 on to 1:45. As of 1:49, it was still in the range at 85.95.

Gold is still holding firm, and the market is calming down. There's a good chance of a gain, although a slight one, at the close.


Update: The choppiness largely ended as gold settled into the middle of its range. Another down-and-up bob, between 3:35 and 4:10 PM ET, left the metal where it was beforehand. As of the close, the spot price was $1,242.40 for a small gain of $1.60. The Kitco Gold Index divided the gain into +$0.50 for predominant buying and +$1.10 for greenback weakness.

The U.S. Dollar Index broke out of its range on the high side in mid-afternoon. It rallied through the afternoon, although more choppily after breaking through 86.0, until 4 PM when it bounced between 86.03 and 86.12. As of 5:30 PM ET, it was at 86.06.

Its daily chart, from Stockcharts.com, shows a slight decline from yesterday's level:



Given that decline, the ceiling of the Index's current range is better pegged at 86.5. 85 is the floor.

The sideways movement continues as no flare-up has moved the Index in either direction. Its RSI level, found on the top of its chart, is now slightly above neutral and continues to stay in the doldrums around there. The Index's MACD lines, found at the bottom of its chart, continue in a bearish configuration but the distance between the two continues to narrow. Should the black line cross above the red line, or the red line fall below the black line, a switch to a bullish configuration will have been made. The black line is currently at the lowest level it's been at in the last six months.

Since the news flow about the U.S. and other economies has continued, without the Index reacting all that much, it would take a special event to make for a driver. Until such a jolter arrives, or the internals change, the Index will continue to trade in its range. There's no bullish pressure, but there's no real bearish pressure either.

Turning to gold, its own daily chart shows today's slight gain built on yesterday's:



Gold's own MACD lines have drifted to a bearish configuration, but they've done so before without changing the overall neutrality shown for most of this month. Its RSI value has stayed stuck at somewhat above neutral; both are consistent with overall trendlessness.

Yesterday, gold did bump into the $1,230 floor of its current range and even bent it a little. Today, it got above $1,240 and stayed there after the wider fluctatations of this morning changed into the gentler fluctuations of this afternoon. The metal seems to be preparing for another run at the $1,260 ceiling of the range. It might, but recent trading shows that such an advance - even if it results in a new record - will likely be seen as yet another selling opportunity.

A post-pit Wall Street Journal report said the fall in gold, caused by a better than expected European Central Bank tender operation to help out European banks that showed less trouble than expected, was cushioned by the overall fall of the greenback. The activity was relatively quiet.
"Pretty much the only news was the ECB tender early in the day that gave a positive tone to the euro," said Dave Meger, director of metals trading at Vision Financial Markets in Chicago.

This weakened the dollar and helped gold, he said.

"But on the other side of the coin, you are losing any potential safe-haven demand for gold," Meger said of the reduced worries about banks following the tender. "So it was kind of a double-edged sword for gold. That left gold back and forth in a range."

The July 4th holiday is being celebrated on financial markets on Monday, which makes for a holiday weekend starting in two days. The quiet can be ascribed to that approaching long weekend. There are two opinions about these quiet times: fluctuations will be minimized because traders don't bother to log in big positions, or volatility will be accentuated because there'll be less cushioning. It could go either way tomorrow and Friday.

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