Gold, higher in the far East on Monday, was drifting lower until the 10:00 hour, when it suddenly went vertical, adding $18 in the space of a few minutes, after which it traded mostly sideways for the rest of the day, finishing at $836.90, up $14.90 from Friday. Overnight, gold is slightly lower.

Platinum traded to $850 in Hong Kong, but that was the high for the day and, though it failed to hold a mid-morning bump similar to gold’s, it still managed to finish in the green at $835, up $12. Overnight, platinum has been flat.

Silver followed a path very similar to gold’s, but its mid-morning spike was even more impressive as it shot from $10.25 to $10.65, then held onto nearly all of its gains, closing at $10.63, up 39 cents. Overnight, silver is trending lower. (Click here for charts)

It was a solid start to the week for the precious metals, especially silver, which outperformed gold even as it bucked the trend of skidding equities. Otherwise, the usual suspects were mixed, with the dollar falling along with oil.

Gold, which traded barely below platinum on Friday, finally closed above the other silver metal for the first time in 12 years.

Last week, gold responded to a 4% drop in the value of the dollar by tacking 9% onto its price, and it appears poised to take advantage of the buck’s continuing decline.

“One of the things gold has going for it is that it’s viewed as an international currency,” said Frank Lesh, a trader at FuturePath Trading in Chicago. “We’re expecting the Fed to take the rate down from 1 percent to 0.5 percent. Gold is reacting to the downturn in the dollar.”

Dow Theory Letters‘ venerable Richard Russell wrote of the dollar’s weakness: “I’m only going to include two charts on this site. The first is a daily of the U.S. Dollar Index Future – Spot Price. Ugh! I see a well-defined head-and-shoulders top. If this was a stock that you owned, what would you do with it? SELL IT. Yesterday, the Dollar Index dropped below its support and at the same time dropped below its 50-day moving average. UGH again.”

And Australian website, The Privateer, chimed in by writing that “the U.S. Dollar Index has now traced out a series of lower highs and lower lows since its 88.41 peak three weeks ago. This is a STRONG indication that the huge U.S. dollar rally which began back in July, fuelled by U.S. capital repatriation and even more by global debt deleveraging, is over.”

If so, nothing could possibly be more bullish for gold.

Source: Gold Continues To Thrust Higher