Back To Drifting

After a directionless Friday afternoon, gold's risen slightly overnight. A trading range between a little above $1,136 and a little above $1,133 held from 2 AM ET to about 8:45 AM ET. As of the time of this post, a brief break on the downside has not ended the range; spot gold's at $1,134.20.

This Bloomberg report attributes the earlier rise to a fall in the U.S. dollar, and to safe-haven demand caused by Greece's budgetary woes. The U.S. Dollar Index had been drifting down from 2 to 6 AM ET, but is now drifting up. Since today is Martin Luther King Jr. day, trading in both the greenback and gold will be truncated; only electronic trading will take place.

The gold-at-a-discount indicator, which is the price of gold divided by the price of a share of GLD, closed last Friday at 10.20. Since the exchanges are closed today, this indicator will not change on the GLD side today. The level to watch for is below 10; at that point, gold itself is trading at a discount to GLD shares. The last time this happened was at the beginning of this month. When gold is trading at a discount to GLD, it's a sign that gold has become oversold. A chart of the ratio, courtesy of Stockcharts.com, can be found here.

This chart of the U.S. Dollar Index shows Friday's recovery from the index's slide earlier last week:



The weekly chart shows that, even with Friday's rebound, last week was still a down week for the greenback:



The weekly chart for gold shows somewhat of a mirror to the greenback weekly chart - with the eye-catching exception of last week, where weakness in the U.S. dollar was not mirrored by strength in gold:



As noted in earlier stories last week, gold was dragged down by the report that the People's Bank of China is trying to rein in inflation. Any recent Greece-related safe-haven demand either isn't evident or has been swamped by the PB of C bear trade.

In tune with gold's recent lack of strength is this Gold Investing News report by Kishori Krishnan saying, "Gold Price May Test Support Levels."