Gold Holds Even As Week Begins

The start of this week's trading last night saw gold not doing much of anything. The metal crept along in a tight trading range bordered by $1,065 on the downside and $1,068 on the upside until 3 AM ET. Then, it spiked up slightly to $1,074.60, after which it slid back down to where it was. As of 7:39 AM ET, Kitco has its change from last trading day at exactly zero; the Gold Index split the zero into a decline of $2.60 due to strengthening of the U.S. dollar and a gain of $2.60 due to predominant buying.

The slight gain in gold was mirrored by a decline, temporary though it was, in the U.S. Dollar Index. After marking time itself just below 80.5, the Index took a dive staring just after 2 AM. Lasting until 4 AM, the slump took it down to 80.10 before halting for about forty-five minutes and then reversing before pulling back a little again. As of 7:50 AM ET, the Index was somewhat below last night's highs at 80.30.

This Zero Hedge post points to a dog that didn't bark in the gold arena. Last night, there was a little bellicosity directed at the U.S. in PRC newspapers; there was also a call for the People's Bank of China to raise reserve requirements yet again because inflation's getting out of control. That call, from National Bureau of Statistics chief economist Yao Jingyuan, didn't have an effect on the price of gold.

A trader quoted in a Wall Street Journal Online article points to the earlier uptick in gold as a sign that things were overdone on the downside late last week:

"It looks like we're bouncing back," said Michael Kempinski, a precious metals trader at Commerzbank in Luxembourg. "I think it was overdone on the downside." Traders said physical demand and bargain hunting picked up after gold's selloff Friday.

Just afterwards, though, was a caution that the Eurozone troubles aren't yet over.

This Bloomberg report, webbed by Business Week Online, also attributes gold's rise to the falling greenback and the falling greenback to easing of troubles in the Eurozone. Its first quoted expert points to gold being oversold last Thursday:

“The dollar is down,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. The metal’s sudden drop last week is also “a good indicator that prices may rise,” he said....

Spot gold’s relative strength index, a gauge of whether a commodity or security is overbought or oversold, plunged to 38.50 from 49.5 on Feb. 4 as bullion fell the most in 14 months. The gauge approached the level of 30 that some investors and analysts who scrutinize technical charts view as a signal of an impending climb.

“From a technical perspective, gold was heavily oversold,” Fertig said.

Of note in the article, after a quote from another mining CEO who sees gold gaining overall in 2010, is the fact that holdings in the SPDR Gold Shares Trust (GLD) were actually up 1.83 metric tons last Friday. That gain replaced about 31% of the 5.79-ton loss the ETF had on Thursday.

That CEO, Mark Bristow of Randgold, oversaw a more than tripling of its fourth-quarter profits.

A Reuters report goes into more detail about GLD's increase in holdings, noting that it's the first inflow since December 2nd. It also says that a two-day meeting of G7 finance ministers in Iqaluit over the weekend brought some optimism but not much:

A two-day meeting of the Group of Seven ministers and central bank governors in northern Canada this weekend was capped by reassurances about debt-strapped Greece and agreement that banks should pay for future rescue funds.

But dealers said investors were disappointed the meeting did not result in concrete action to tackle sovereign debt issues in countries such as Greece, Portugal and Spain.

This Stockcharts.com chart shows daily gold over the last three years:



The indicators on the top and bottom do show oversold conditions, but not as extreme as was the case on September and October of 2008. From gold's standpoint, the Eurocrisis wasn't as extreme as the U.S. one that hit back then.

As regular trading opened, gold was pushed down after moving up to just above $1,070. From 8:15 AM to 8:45, the metal lost more than eight dollars an ounce before recovering a little. As of 8:53, gold was $1,063.30 for a loss of $1.70. Most of that loss was attributed to strength in the U.S. dollar by the Kitco Gold Index. The greenback itself, as expressed by the U.S. Dollar Index, was weakening slightly in that time. As of 8:54, it was at 80.27.