Growing up in seaside towns, my parents taught me to constantly keep the water in view lest a sleeper wave pull me under. If dad was a metals trader, he'd probably offer similar advice on the gold market. You can't turn your back on it for a moment.

COMEX traders got a good lesson yesterday as gold prices tumbled below $900 an ounce in the day session amid continuing speculation of brightening economic prospects. By the time floor trading closed, the active April contract lost nearly $28 to settle at $889.10.

Better-than-expected U.S. economic data and seller exhaustion in the equity markets fostered some optimism for financial issues over the past few sessions, taking the safe-haven luster off gold. Yesterday's price break, in fact, appeared as a breakthrough move out of the head-and-shoulders top formed over the past couple of months.

Then the sleeper wave came ashore. When the report of the Federal Open Market Committee's intention to buy a boatload of long bonds was digested in the overnight market, gold prices reversed. The move, expected to lower interest rates on mortgages and other consumer debt was unusual, to say the least. When the Fed engages in open market operations, it typically plays in the short end of the yield curve, so this intervention really got noticed, not just for its size but also for its long-term balance sheet implications. The vision of the government printing money to buy back all this paper danced in traders' minds.

The greenback plummeted apace. By the time electronic trading ended, April gold ended up notching a net $23.30 gain to settle near session highs at $940.10. Chartwise, that made yesterday a bullish outside day. But we'll come back to gold's technical prospects in a minute.

Gold's initial sell-off sent the GLD/GDX ratio back down to retest its 200-day moving average. Fast and hard. The subsequent bounce in prices, if it holds, will mark a second successful defense in a month. The ratio, you'll recall, measures the value of the SPDR Gold Shares Trust (NYSE: GLD) relative to that of the Market Vectors Gold Miners ETF (NYSE: GDX).

A rising ratio indicates increasing strength of bullion over mining stocks.

GLD/GDX Ratio

So, gold stocks aren't yet out of the woods (see "Gold Stocks Still In The Woods"). Trust us, though; we'll keep you posted when they are.

COMEX trading action will be very closely watched by gold chartists over the next two sessions. The downturn and reaction may signal a near-term low. Resistance for the April contract is Wednesday's high at $954.00. Beyond that, gold bulls would set their sights for a close above second resistance at the $964.00 level.

If equities continue to rally, though, gold may struggle to hold on to its gains. Support's at $925.00. Below that, of course, is Wednesday's low at $882.70.