Friday, July 2, 2010

Gold Rises Slightly Steady Overall

Gold started off today's regular trading with a dip, which reversed somewhat after the release of the unemployment report for June. By 9:00 AM ET, the metal was fluctuating around $1,204. A run up to $1,209 between 9:15 and 9:30 reversed, and the metal sunk down to exactly $1,200.00 by 10:00. The factory-orders report, which showed a drop of 1.4% in May for the biggest fall since March of '09, didn't affect the gold price at the time of its release. Not until 10:15 did the metal go on another rally, which peaked at $1,207.50. The next dip took it down to a higher low, and it stabilized north of $1,205. As of 11:54, the spot price was $1,205.90 for a gain of $6.50 on the day. The Kitco Gold Index split the gain into +$3.80 for predominant buying and +$2.70 for a weakening greenback.

The U.S. Dollar Index stayed steady in mid-morning trading, hovering around 84.25, but rallied in late morning. Starting just after 11:05 at 84.245, it peaked above 84.4 by 11:45 and then pulled back a little. As of 11:50, it was at 84.37.

This morning has not seen a repeat of yesterday's plummet, nor any real aftershock. Gold has spent the entire day above yesterday's close, and the signs point to it continuing in the plus column in the afternoon.


Update: The upward bias in late morning continued at noon, when gold jumped to above $1,210. Staying between there and $1,211 until 12:25 PM ET, the metal then fluctuated around the $1,210 level until it sunk right at the end of the pit session. As of the end, or 1:30 PM, the spot price was $1,207.10 for a gain of $7.70 on the day. The Kitco Gold Index divided the gain into +$6.50 for predominant buying and +$1.20 for greenback weakness.

The U.S. Dollar Index, after sinking back to about 84.35, rallied all the way to 84.51 before taking a rest. As of 1:30 PM, it was at 84.46.

Although the noontime jump to above $1,210 didn't last, gold is still sporting a solid gain. The rest of the session is likely to be quiet, and gold will likely drift from here. No aftershocks are evident, and it's very unlikely there'll be one during the final electronic-trading hitch of the week.


Update 2: There wasn't one. Instead, the metal drifted back up above $1,210. The recovery started at 2 PM ET and proceeded steadily until it stopped around $1,211. Then, the metal fluctuated between $1,210 and $1,212 for the rest of the day. At the end of the week, the spot price was $1,211.30 for a gain of $11.90 on the day. The Kitco Gold Index apportioned the gain into +$10.90 due to predominant buying and +$1.00 due to overall weakness in the greenback.

The metal incurred its second weekly loss in a row. From last Friday's close of $1,255.70, the loss on the week was $44.40 or 3.54%. Most of the loss was due to Thursday's rout, of which about a quarter was erased today.

The U.S. Dollar Index drifted back down after double topping at 84.54 shortly after the last Update. After doing so, it fell in a two-stage drop that left it at 84.37.

Its daily chart, from Stockcharts.com, shows yesterday's rout continuing today:



[The chart also shows a glitch. The top part of today's candlestick shouldn't be any higher than about 84.75.]

Again, the Index has shown weakness subsequent to breaking through the former 85.0 support level. There wasn't any relief rally for it today, although there might be in the near future. Its RSI value, found at the top of the chart, remains closer to oversold than neutral; its MACD lines, found at the chart's bottom, are still solidly in a bearish configuration. Not much has changed for its gloomy picture, although it might turn around and make a try for 85.

Gold, on the other hand, shows a definite recovery rally. What made this day unusual is, with respect to the spot price, the interday low of today was higher than the close yesterday. Its own daily chart shows today's interday low coinciding with yesterday's close:



That recovery is fairly unusual for gold given how it's behaved after previous plummets, and lends credence to the claim that yesterday's plummet was accentuated by the low volume typical of pre-holidays.

The main reason for the recovery was solid evidence of bargain hunting, of physical gold, from the Indian market. In previous plummets, buyers there held back and waited for further drops. Not this time, or at least not enough did so to stay a rush into the metal. Bargain hunters in other regions acted accordingly. Given the gloom yesterday's plummet induced in gold timers, in contradistinction to bargain hunting from stronger hands, yesterday's bottom looks like it was a buying opportunity.

Last Tuesday, gold had recovered from a much milder tumble on Monday; it had climbed back to above $1,240 at the close. That close was the cut-off point for this week's Commitment of Traders data, as graphed here. Total open interest increased by 5.05% to another year's record. All reportable categories showed increases, and the percentage range of those increases was fairly narrow. No single reportable category stood out, which suggests yesterday' plummet was a surprise.

The U.S. Dollar Index last Tuesday had rallied back above 86, near the top of its then-range. Its own Commitment of Traders data, as graphed here, shows another decline in open interest as of that point. All categories shrunk with the exception of non-commercial shorts, which increased by a smidgen. Again, that group of holders showed a little sagacity as a group.

Turning back to gold, a post-pit Reuters report concurs with the bargain-hunting explanation, and adds short-covering. Amongst the points therein, these were included:
* Gold investors avoid opening new positions ahead of a three-day U.S. Independence Day weekend, and major moves largely absent with steadier foreign exchange and U.S. equity markets - traders.

* Bullion largely ignored a government report showing U.S. private payrolls rose only modestly in June and overall employment fell for the first time this year....

* Gold's weakness [yesterday] was due to aggressive unwinding of the previously popular "long gold, short euro" trade - Bill O'Neill at LOGIC Advisors.

* Gold supported [today] as the dollar slipped against the euro, extending the previous day's steep losses on concerns over the U.S. economic recovery after disappointing U.S. jobs data.
This week was hairy, but it ended better than what would be expected given normal recent post-plummet behavior. The signs indicate that gold fell out of bed yesterday, and its intermediate-term bull run is still intact.

Thanks for stopping by and reading what I've got here, and enjoy the holiday weekend if you celebrate it; I hope the crowds aren't too bad where you are.

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