Gold Drifts Upwards Before London Trading

Evening trading began with a slump down to the $1,105 level, at which gold bounced off until 7 PM when a slight rise ensued. That rise was built upon until the price reached close to $1,109 at about 8:45 PM ET. Then, a pullback took it to $1,107. Before night turned into morning, an attempt was made to rise above $1,110; it stopped just before midnight just below that level. $1,110 was bested just after 2 AM, when a drifting following the first attempt turned into another rally. The second rally got gold up to $1,115.20 before it ran out of gas just before 5 AM. A more sustained downtrend got rolling, which pulled the price down below $1,110 again. As of 7:49 AM ET, spot gold was at $1,107.00 for a gain of $0.40 since the end of yesterday's trading. The Kitco Gold Index had 80 cents added to the price due to U.S. dollar weakness and 40 cents subtracted due to predominant selling.

The U.S. Dollar Index spent most of the overnight session declining, albeit slowly. From 5:30 PM to 8:05, a gentle rally took the Index up from the 80.72 level to 80.85. Then, a drop launched a downdraft that took it down to 80.55 by 8:50. The Index drifted for a time, before slumping again up to just before midnight. Another range ensued, drifting just above the 80.5 level, until it puled up from 1:25 to 3:30 AM in a gentle two-stage rise that ended above 80.75. The next two-and-a-half hours saw a downdrift that took the Index down to 80.4 by 5:55. Another upwave commenced at that time, which made the morning's action something of a trading range. As of 8:03 AM, it was at 80.65.

A Bloomberg report, webbed by Business Week, attributes last night's rise to demand stirred up by the Grecian crisis. [Now that the panic button isn't being pressed, gold is benefitting. The crisis certainly explains the otherwise-odd short-term positive correlation between the U.S. dollar and gold.] An expert ascribes the rise to increasing distrust of both major currencies:

“The euro zone scenario is still lingering in the market,” said Bernard Sin, head of currency and metals trading at gold refiner MKS Finance SA in Geneva. “People don’t trust the dollar, they don’t trust the euro, so the only way to go is to look at other alternatives such as gold. It’s a safe haven.”

Evidently, there are some people who still link sovereign-debt crises to future inflation, even if the Euro mechanism is designed to prevent that. Mentioned near the end of the article is a rise in the Indian import duty for gold: from 20 rupees per gram, it's going up to 30. "That may cut domestic demand and fuel a gain in gold prices, according to Rajesh Exports Ltd. Chairman Rajesh Mehta."

A Reuters report goes into a rumor that was scotched overnight: a claim that the People's Bank of China would buy the remaining 191 tons of gold being sold by the IMF. The writer of the story that claimed so "later told Reuters she did not have official sources for her story." The first quoted expert says that gold's movement have largely been in line with the greenback:

"Gold has moved higher but only what you'd expect with movements in euro-dollar. I don't believe it makes sense for China to make such a big public purchase of the remaining gold," said David Barclay, commodity strategist at Standard Chartered in Hong Kong.

Interestingly, the other experts comenting on the rumor seemed skeptical too.

A brief report from Marketwatch has a quote from TheBullionDesk.com that points to physical-demand support for the price:

"The metal is likely to continue to track the euro and broad risk sentiment in the coming sessions; however, dips are expected to draw further strong support from both jewelry and investment players and should provide a floor," said analysts at TheBullionDeskcom.

The rest of the report mentions upcoming U.S. economic data, gauging the extent of the recovery, that may influence the price.

The first revision of the fourth-quarter U.S. GDP number was announced, and it was bumped up a bit: 5.9% annualized instead of the initial 5.7%. The raising came from upped figures for inventory and other investment, and a downwardly-revised price deflator. Personal-consumption expenditure was revised downwards. Again, the U.S. Dollar Index reacted refractorily to the data's release. Initially jumping up seven basis point within two minutes, and building upon a five-basis-point rise that gun-jumped the announcement, it pulled back to below the level it was at as of 8:28. As of 8:51 AM ET, it had bounced back slightly to reach 80.66.

Gold took the opportunity to rise above $1,110 again. As of 8:53 AM ET, it was at $1,111.80 for a gain of $5.20. The Kitco Gold Index partitioned the gain into +$1.45 due to U.S dollar weakening and +$3.75 due to predominant buying. After drifting when regular trading opened, and dipping right after 8:30, the metal took off in an almost-unimpeded advance from 8:33 to 8:53.

Despite the lack of any appreciable rally as of yet, gold's been doing quite well given the greenback headwind. I'm sure the latest rise will be attributed to the return of the now oft-cited "risk appetite."