Gold On The See-Saw

Once again, there was a decline from 8 to 8:30 AM ET; today's pushed the price down to just below $1,090. It stayed at that level for about a half an hour. Then, the metal leapt up almost $10/oz before falling again to the $1,090 range. The release of the housing-sales report that shows an unexpected drop for December hit the stocks markets but didn't have much of an effect on gold, which was climbing up slowly. According to the Kitco Gold Index, as of 11:20 AM, more than two dollars of the drop from yesterday to that time today is due to predominant selling.

The U.S. Dollar Index climbed back up to 78.60 after dipping down to the 78.5 level as of 10:30. Although an earlier dip took gold up with it, which helped push the metal up to that $1,090 level, the later dip didn't. After reaching 78.6, though, the dollar dropped back to 78.55 as of 11:30 AM.

So far, it's been a day on the see-saw. This afternoon, at around 2:15 PM ET, the FOMC releases its policy statement. So far, the expectations are that there'll be little that's newsworthy from it. We'll see if the see-saw's still in place after the release.


Update: The text of the announcement did contain little that was newsworthy. More optimism about the economy was discerned from it; the Committee expects growth to be better in Q4 than in Q3. The Fed funds rate will be held where its was by a vote of 10-1. Thomas Hoenig was the lone dissenter.

The range that gold's been in did break on the low end, but not because of the Fed announcement; that break occurred earlier. On the the other hand, the U.S. Dollar Index shot up from 78.54 to just above 78.8 since the announcement's release. After dropping below $1,084 by 1 PM, gold stayed in the $1,085 range. The release of the Fed announcement had almost no effect on the metal's price.


Update 2: After that spill, things turned quiet in the gold market. The U.S. Dollar Index's upwards run earlier this afternoon, followed by one that ended a little after 3 PM ET, was a result of an attack on the Euro; that currency plummeted down below the support level of $1.40 before recovering slightly to close above it. The timing suggests that the FOMC meeting had nothing to do with it, or that some large plunger was testing the water pre- and post-meeting. Following the second test and a partial retreat, the Index ended up at just below 78.70. The day's high of 78.847, which almost bested last September's high, didn't last.

Gold, if anything, was only battered slightly by the greenback's run. After falling to $1084, a level reached at 1 PM ET, it floundered around the $1,086 level in an increasingly narrow range after 2:45 PM. At the close of regular trading, spot gold was at $1,087.20 for a drop of $9.60 on the day. The Kitco Gold Index divided that loss into $2.95 attributed to the rise in the U.S. dollar and $6.65 due to predominat selling.


This Reuters article attributes gold's fall to the greenback's rise, but also mentions option and futures expiration:

U.S. gold ended over 1 percent lower on Wednesday as the dollar hit a six-month high against the euro, and the bullion market braced for choppy option trade and contract rollover ahead of the Federal Reserve's interest rate decision....

That seems to be the reason why gold fell prior to the FOMC meeting. At the very least, it's good enough as any. At the end of it all, the $1090 support level gave way but $1,085 is still holding.