After Spending Time In Range, Gold Jumps Then Stumbles

Gold spent most of yesterday in a trading range, bracketed by $1,115 on the upside and $1,110 on the downside. In evening trading, the range was poked at on the upside at just after 7 PM ET; that rally ended up being only a blip. The second test, starting at about 11 PM, proved to be more sustainable.

At that time, the metal crept up above $1,115 but didn't inch that far above. The pullback near midnight stopped at $1,115, indicating a successful breach of the upper end of the range. The next dip, between 1:30 AM and 2:15, took gold slightly below $1,115, but it reversed after that time and climbed all the way up to $1,121.90. The rally fizzled as of its top at about 3 AM, and the price entered a relatively smooth decline that took it all the way down to $1,104.30 by 6:45 AM - a drop of more than seventeen dollars an ounce. From that low, gold pulled up a bit to reach the $1,110 level again. As of 8:06 AM ET, spot gold was at $1,112.50 for a drop of only 10 cents on the day. That loss was divvied up by the Kitco Gold Index into a gain of 75 cents due to predominant buying and an 85 cent drop due to strengthening of the U.S. dollar.

The U.S. Dollar Index showed some of the same listlessness yesterday evening, but not for all of it. After an aborted rally that ended at 80.6 as of about 6:35 PM, the Index dropped before recovering to a lower level. That lower peak, made at 9:20 PM, was broken by a sharp drop less than ten minutes later that took the Index below 80.5. A further decline followed, that took it down to the 80.35 level just after midnight. The point where the Index fell below 80.4 was about the same time that gold inched through last night's range on the upside.

From 12:25 AM ET to an hour later, the Index lumbered up in a small rally that took it up to 80.42 and brought gold to a little below the $1,115 level. That rally got exhausted, and turned into an accelerating-decelerating decline which climaxed with a thirteen basis point drop within five minutes in the 2:10-2:15 timeframe. The decline then decelerated, taking another hour to reach bottom at just below the 80.1 level. After getting stuck for the next half hour in a ragged range bordered by 80.09 and 80.16, the greenback entered into a rapid, steady climb that took it all the way up to 80.78 as of 7 AM: in three hours, the Index gained almost 70 basis points. A relatively minor pullback left the Index ranging between 80.6 and 80.7. As of 8:30 AM ET, it was at 80.61.

A Reuters report attributes gold's early morning slide to a fall in the Euro, but also notes the above-mentioned listlessness and attributes it to a wait for direction from the Federal Reserve through Ben Bernanke's testimony to Congress tomorrow and Thursday.

Dealers and analysts said any attempts at rallies were stalling as the market concentrated on future U.S. monetary policy after the Federal Reserve tightened its emergency lending rate last week.

"People are holding back until more data starts to come out and Bernanke's testimony. It's a bit of a pause," Mitsubishi analyst Tom Kendall said....

"The market as a whole understands that this is the beginning of a process that's going to emerge and will take several years to run to its conclusion in terms of tightening monetary policy again. But the issue is timing," Kendall added.

Near the end of the article, it's noted that the holdings for the SPDR Gold Shares Trust (GLD) rose by 0.305 tons to a total of 1,107.931 tons.

Over at the Wall Street Journal Online, the same range behavior was noted but the timeframe and span were wider.

Gold is drifting in a range between the lows and highs of the past week around $1,100 an ounce and $1,130 an ounce. Analysts said a breakout of the range will most likely be driven by a change in the euro's direction against the dollar, and that may not occur until the end of this week or next week.

"I think we're going [to range trade] this week," said Mitsubishi Corp. analyst Tom Kendall. Mr. Kendall said gold could trade to $1,140 an ounce if the euro strengthens, or fall back to $1,050 an ounce if it slides against the dollar.

Also quoted is a recent HSBC report, which said that a low-interest-rate environment and accomodative monetary policy helps keep gold prices from falling but didn't add much to the price.

Regular trading for gold opened up with a drop to $1,110, which reversed somewhat before continuing downwards again. The $1,110-$1,115 range discussed above is now broken. As of 8:57 AM ET, spot gold's at $1,109.70 for a loss of $2.90 since yesterday. The Kitco Gold Index attributed -$1.60 to the U.S. dollar strengthening and -$1.30 due to predominant selling. As for the greenback, it's still in the 80-6-80.7 range after testing on the upside: as of 8:58, it's at 80.66.

Although the U.S dollar's level is still one of the main drivers of the gold price, the latter seems less responsive to the former. Perhaps this is the more immediate reason behind the impression that the gold market's waiting for something to happen. That impression does gibe with the trading range that's formed over the last five trading sessions.