Attempted Break Below $1,080 Leads Nowhere

The range that gold was in has been broken to the downside, but not by much. After slumping to below $1,085 yesterday at around noon, the price stayed between $1,085 and $1,090 - with one exception, which stands out because of its time.

Shortly before 9 PM ET, just before President Obama's State of the Union Speech began, there was a sell-off that pushed spot gold down to $1,079.40. Within an hour, gold was back up above $1,085. The new support level is lower, but there is new support at it. At about the same time, the U.S. Dollar Index spiked up above 79 - to 79.069 - but quickly fell back to the 78.7 level. The downward spike in gold seems to be engendered by that upward spike in the greenback, and both were engendered by pre-speech speculation that was confounded by the real thing. Right now, the U.S. dollar is bumping against $1.40 to the euro: as this chart shows, the euro sunk below that level before rebounding. It looks like the Euro's being hit to the benefit of the greenback, in hopes that a break through $1.40 will push the Euroland currency down a lot further. This time, the attempt was disappointed. If successful later, it won't mean much good for gold (in U.S. dollars.)

The rest of the night, and early this morning, saw gold return to the $1,085-$1,100 level. A three-hour spell that saw gold slightly above $1,090 ended at about 6:45 AM ET with a slide down to just below $1,085. A futher run above $1,090 ended just before 8 AM ET. Today, the U.S. Dollar Index has been fluctuating upwards after last night's spike-up.

A Globe And Mail report attributes the recent firmness in gold to less risk aversion following Obama's speech:

“The precious metals have been struggling with dollar strength so far,” said Saxo Bank senior manager Ole Hansen.

He said the Obama speech and expectations Federal Reserve chairman Ben Bernanke will be reappointed had helped dispel some risk aversion. “These things have removed some uncertainty, and that has helped the market to stabilize,” he said.

The dollar slipped from a six-month high versus the euro after Mr. Obama laid out plans to revive the U.S. economy and allayed market worries about moves to limit bank risk-taking in his comments.

This Reuters report quotes a Japanese expert that's more bearish:

Kazuhiko Saito, a chief analyst at Tokyo's Fujitomi Co Ltd, said the investment environment for gold was beginning to look poor, particularly as an interest rate hike appeared more likely than it had at one point.

"I think gold might fall below $1,080 as sentiment is not good for the precious metal," he said.

So far, anyway, that level has not been breached except during interday. According to that same report, the SPDR Gold Trust's (GLD's) holdings still haven't changed. At least part of the "sentiment" that Saito was referring to is Indian: according to this report, gold demand in Mumbai is dropping because buyers are expecting lower prices.

The gold-to-GLD ratio closed at 10.21 and was actually above that level for most of yesterday; its interday high was 10.35, and its low was 10.17. This indicator is presented as an item of reader interest.

Just before 9 AM ET, the U.S. Dollar Index has pulled back to a trading range centered around 78.73 after reaching 78.788 shortly after 8:30. The Kitco Gold Index has pegged gold as strengthening due to predominat buying.

The usual 8-8:30 downdraft in the gold price was hardly there. As of 9 AM ET, spot gold was $1,091.20, although how long it'll stay above $1,090 remains to be seen.