Friday, June 25, 2010

Gold Makes New Daily High, Stays Above $1,250

After easing down to $1,250, gold stabilized and then jumped up to above $1,255 after 9:00 AM ET. Pulling back, it turned up again at 9:45. A 2-year high for the University of Michigan consumer sentiment index, whose 76 reading was above expectations for 75.5, coincided with a acceleration of the run that took the metal up to $1,258.10 just after 10:15. Pulling back again, the metal settled around $1,254 and dawdled between there and $1,255. As of 11:50 AM ET, the spot price was $1,254.80 for a gain of $11.40 on the day. The Kitco Gold Index split the gain into +$10.30 for predominant buying and +$1.10 for a weakening greenback.

The U.S. Dollar Index slid a bit downwards, but mostly stayed in a choppy range between 85.7 and 85.85 before breaking through on the downside around 11:45. As of 11:52, it was at 85.61.

Gold has managed to get and stay above the old $1,240 resistance level, although a fifth weekly gain is still out of reach for the metal. It's close enough to have a shot at that gain this afternoon.

Update: The rally that started a little before noon ET continued until a new daily high of $1,259.50 was made. Making it at 12:20, the metal slid back to the $1,254 level before rebounding a little. In so doing, it slimmed the chances for a fifth weekly gain this week. As of the end of the pit session, or 1:30 PM, the spot price was $1,255.70 for a gain of $11.00 on the day. The Kitco Gold Index divided the gain into +$6.80 due to predominant buying and +$4.20 due to greenback weakness.

The U.S. Dollar Index continued sliding down at a fairly rapid rate after breaking below 85.7; the slide continued almost uninterrupted since the breakdown around 11:45. As of 1:35, the Index was still falling at 85.36.

Yesterday's climb in gold is holding, and was even added to this morning. Things are fairly cheery for the metal, even if it slides back in the electronic-trading hitch during the rest of the afternoon.

Update 2: Gold did slide back right after the pit session ended, but recovered at 1:45 PM ET. It traded between $1,254 and $1,255 during mid-afternoon. Dipping slightly below just before 4:00, the metal recovered again and climbed up to $1,256. A brief fluctation between that level and $1,255 left the metal at $1,255.70 at the end of the week's trading. The change on the day was $12.30, which the Kitco Gold Index split into +$6.30 for predominant buying and +$6.00 for weakening in the greenback.

The metal broke the four-week winning streak but only barely. Last Friday's close was $1,256.50, and today's was only eighty cents below that figure. The drop on the week was a miniscule 0.0637%.

The U.S. Dollar Index, after falling in early afternoon, ended that tumble just before 2:00. Since then, until trading closed for the week, the Index was ranging between 85.25 and 85.35. A last-minute blip-up got it to the top of the range as of 5:00, when it closed at exactly 85.35.

Its daily chart, from, shows the pullback continuing for the third day in a row:

Today's was stronger than both yesterday's and Wednesday's. It looks as if the Index will make a run at 85.0 and possibly cross it on the downside.

If so, then the bull run for the greenback might as well be over. The Index's RSI value, found at the top of its chart, is as low or lower than it's been since the bull started running in the beginning of December. It need not drop much before the RSI starts getting close to an oversold level. Reaching that level was not seen since September of last year.

As for now, the Index is still in a range between 85.0 and 86.0 if opening and closing values are used. Given its relative oversoldedness, a bounceback is far from improbable.

Gold's daily chart, also from, shows today's continuation of yesterday's breakout above $1,240:

In retrospect, last week's breakout from the chart's ascending triangle formation was premature but solid. Given that it was pushed down, though, there's reason to doubt the pattern's efficacy. Gold might have gone from one range to a higher one, with a $1,240 floor and $1,260 ceiling.

Last Tuesday, the metal was starting to recover from the previous day's plummet; it was still below $1,240. The end of that day's trading was the cut-off for its Commitment of Traders data, as graphed here. Total open interest rose to a new one-year high, with all reportable categories rising. The rise in each wasn't that far out of line with the others, so no discernible pattern is evident. Fitting for a recovery day, which turned into the first day of a slow but steady short-term rise.

As for the U.S. Dollar Index, its own CoT graph shows the state of the market at the week's closing high before its downturn. Total open interest shrunk slightly, and the reportable categories' changes were slight with one exception. Non-commercial longs and commercial shorts were down from the previous week. Commercial longs were up a little. The exception was non-commerical shorts, which gained by 12.6%. As the action over the next three days indicates, contract holders in this category were again the savviest as a group.

Turning back to gold, a post-pit Wall Street Journal report ascribed the upturn to haven buying prompted by the downward revision of 1st quarter U.S. GDP to 2.7%.
In addition to the GDP-related worry, participants also wanted to park some money in gold versus paper currencies just in case there are some market-moving announcements from the G-20 summit in Toronto over the weekend, said Sterling Smith, an analyst with Country Hedging in Inver Grove Heights, Minn.

"We continue to see investment demand," said Bill O'Neill, a principal with Logic Advisors in Upper Saddle River, N.J....

"Safe-haven buying remains ripe," said Suki Cooper, precious-metals analyst at Barclays Capital in London

Holdings in the 19 physically backed gold exchange-traded funds Barclays Capital tracks have set another record at 2,084 metric tons of gold....
O'Neill added his opinion that the U.S. economy was in a U-shaped recovery.

Despite the miniscule week-over-week drop, gold ended this week in a strong position. It may be in a higher range right now, with little to drive it, but its performance this month has been quite good given the usual seasonality. It's close to a new record, and it may shuck off the current range and try for one next week.

Thanks for reading what I've got here, and I hope your weekend isn't scorching.


  1. Really like your blog - discovered it a few weeks back. I'm a novice trader (spread betting, mainly) in the UK, bullish about gold over the next few years. Learning a lot from your broad analysis. Did you see this?

  2. Thanks for the report - I only saw the excerpt of it.