Friday, June 11, 2010

Gold Swings In Morning Trading, Climbs In Early Afternoon

Although directionless overall in morning trading, gold went through some wide swings. At $1,220 as of 8:00 AM ET, the metal climbed up all the way to $1,230.20. Bad news on the U.S. retail-sales front added a kicker during that rally, which ended at 9:00. Falling afterwards, the metal ended up sinking back down to $1,220 an hour later. A statement from Philadelphia Fed President Charles Plosser, saying that the recovery is broadening and he'd prefer Fed asset sales to come sooner rather than later, seems to have added impetus to the pullback. The fluctuating then turned upwards, with the metal climbing in two stages to $1,227. Falling back, it paused at the $1,225 level. As of 11:58 AM ET, spot gold was at $1,225.00 for a gain of $7.30 on the day. The Kitco Gold Index attributed +$13.10 to predominant buying and -$5.80 to strength in the greenback.

The U.S. Dollar Index pulled up from its overnight range of 87.0-87.2 with an upswing early on in regular trading, which was amplified by that retail-sales report. Reaching 87.4, it pulled back in early-mid morning to reach a little below 87.2. It then began to rise in an accelerating motion until it crested at 87.6 as at 11:17. Since then, it drifted downwards. As of 11:59, it was at 87.47.

So far, gold has stabilized at a somewhat higher level than yesterday's closing value. Gold's on track for its first daily gain until Monday, which will be booked if the applecart isn't knocked over this afternoon.

Update: So far, it hasn't; instead, gold's climbed upwards during the rest of the pit shift. Bottoming at $1,224, the metal crept up until just after 12:30 ET when it took a leap up to the $1,230 level. Reached at 12:45, gold spent about 10 minutes near that level and making a new daily high of $1,230.90 in the process. Pulling back to $1,226, it climbed back up to near $1,229 at the end of the pit session. As of 1:31, the spot price was $1,228.80 for a gain of $11.10 on the day. The Kitco Gold Index assigned +$17.90's worth of change to predominant buying and -$6.80's worth to greenback strength.

The U.S. Dollar Index, after sinking below 87.5 just before noon, crawled back up to the 80.6 level and fluctuated in between the two. As of 1:35, it was 87.58.

As the end of the week approaches, the final electronic-trading hitch is likely to be quiet. Gold's almost assured of booking its first gain since Monday.

Update 2: It wasn't exactly quiet, as there were mostly-downward fluctuations later in the afternoon. Despite making a new daily high of $1,213.80 at about 2:15, the metal spent the rest of the session drifting down in counterpoint to the rising U.S. stock market. The decline right after that top lasted until 3:30 PM, and took gold down to $1,226. A spike at 4 PM didn't last, but the metal slowly picked up some ground at the end of the session. The Grecian Prime Minister called for a permanent Eurobailout fund, and ruled out either an exit from the Euro or default. Had the Grecian government's austerity plan not been on track, there would have been some cynical interpretations of his proposition. There may already be regardless.

It had little effect on the gold market today, except to add to the stability. At the close, the spot price was $1,227.50 for a gain of $9.80 on the day. The Kitco Gold Index attributed +$12.70 to predominant buying and -$2.90 to overall strength in the greenback. The two changes sum up to the raw change on the day.

For the week, thanks to Monday and today's run-up (particularly the former day's,) gold finished with another gain. Last Friday's close was exactly $1,220.00, making for a $7.50 gain on the week or 0.615%.

From its height of 87.6, the U.S. Dollar Index spent the rest of the session in decline as the gloom dissipated some more. Faster at the end than at the beginning, it left the Index at 87.27 for the end of the week.

Its daily chart, from, shows an unusual amount of interday volatility to the upside that ended up for naught:

Today's interday low was about the same as yesterday's, and the difference between open and close wasn't that much. Interestingly, the interday high was about the same as yesterday's too. Still, today's close to the upside reversed the last three days of declines. The 87 support level still held.

Less cheering is the fact that the Index's MACD lines are still in a bearish configuration. It's only been two days, but the magnitude is enough to suggest that the three days' worth of bullishness was an aberration. The greenback may be in for a tough time next week.

As for gold, its own daily chart shows a more robust recovery from the last three days:

The robustness, though, is compensated by the greater extent of the decline yesterday. Gold's opening level was the same as its interday low, but its interday high was not as high as yesterday's. Still, gold bounced when its RSI line at the top of the graph was above neutral. That's an encouraging sign with respect to overall bullishness.

Still, the metal has weakened after barely making a new record high. The post-May hangover issue is still lurking. Although gold cannot be said to be in any sort of a downtrend, the dip that was reversed today may have some time and length to go.

Last Tuesday, gold made a new record high interday but still closed down. That day's close is the cut-off for the metal's Commitment of Traders data, as graphed here. Total open interest grew a little, as did the total number of contracts held by non-commercial longs. On a percentage basis, commercial longs actually increased more. Non-commercial shorts went up slightly in contract terms, although a fair bit on a percentage basis, and commercial shorts increased too. All of them grew with the open interest, and there was no real outlier among them. No one category seemed to get the jump on the decline over the next two days.

As for the Index, its own CoT graph, for the first time in five weeks, showed an increase in open interest. Last Tuesday saw a decline from a new high, one that came close to matching March of '09's, and the rest of the week saw further declines except for today's tepid rise. Commercial longs shrunk by a large 17.1% from the previous week, and non-commercial shorts increased by 16.5%. Those two categories did anticipate the further declines over the next two days. Non-commercial longs increased, and commercial shorts ticked up somewhat. Unfortunately for tracking purposes, this was the fourth week in a row that non-commerical shorts increased. At the margin, commerical longs anticipated the turndown better as a category.

For gold, a mostly depressing week ended on a better note. Today's rise may carry over into next week, but the markings don't make for a lot of encouragement. Still, it could have been worse this week; there was no plummet, despite optimism returning to the wider investment world. Gold's intermediate-term bull trend is still intact.

Thanks for reading, and may your weekend afford some relaxation.

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