Gold Climbs Back Above $1,110

The gold market shrugged off yesterday's decline with a slow but steady rise that lasted for most of the overnight session. After an initial drop to below $1,102, the price turned around and began climbing until it reached $1,107 at about 11:30 PM ET. The price tailed off to below $1,106, reaching $1,104.90 briefly, but started rising again around 1:00 AM. Pausing at 4:00, it wavered between $1,108 and $1,110 until it made an upward break right around 7:30. Gold peaked at $1,112.60 and then pulled back a little. As of 8:01 AM ET, the spot price was exactly $1,110.00 for a gain of $6.90 on the day. Kitco's Gold Index apportioned the gain into +$2.80 for predominant buying and +$4.10 for a weakening greenback.

The U.S. Dollar Index has weakened, making yesterday's rally appear a relief rally. After drooping when the night part of the overnight session began, the Index rallied to almost 81.7 as of right after midnight. That rise reversed afterwards; the resultant drop was unsteady at times but solid enough to last the entire morning session. As of 8:09 AM, it was at 81.17.

This morning's Wall Street Journal report notes that gold is moving up, but is also being outpaced by platinum and palladium. Trading is light pre-holiday weekend.

Gold is likely to stay in a range of $1,105 an ounce to $1,115 an ounce for now, but Afshin Nabavi, head of trading and physical sales at MKS Finance, said "we may have seen the lows for now," noting good physical buying from Asia.

A Reuters report, as webbed by the Globe and Mail, attributes gold's rise to the slumping greenback.

“Gold generally moves with the dollar,” said John Meyer, analyst at investment bank Fairfax. “The flow of funds into ETFs (exchange traded funds) could mean a strong end to the quarter for metals, that will lead new money into the market.”

The market is also watching Greece, which with its fiscal problems has dragged the euro down against the dollar in recent months.

That has weighed on gold, but uncertainty about finances in euro zone countries is a strong support.

“We view the upside risk as dominant today, supported by indications that Greece is starting to fail in raising money through bond issues,” SEB said in a note.

Another quoted analyst says that physical demand is helping keep gold from falling, but there's too much overhead resistance right now for it to rise appreciably.

A Reuters report not only mentions the firming euro, but also attributes the rise to some short covering.

"Overall, I don't think that gold is necessarily poised for another round higher," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney.

"People are reluctant to take it higher from the general level in the absence of some further significant change in fundamentals or other views. Gold was supported a bit when concerns about Greece were at the most intense."

Gold had been supported by safe-haven buying related to Greece's debt problems but profit taking as well as frequent rebounds in the dollar have erased some of the gains.

In addition to gold failing to make new highs lately, worry about further tightening by the PRC government is holding gold back. Tomorrow is the release of the mainland China Purchasing Managers' Index.

The ADP data were released at 8:15, and they show an unexpected loss in private-sector jobs over March: 23,000, to be exact. The consensus forecast was for a gain of 40,000. That news had a further depressant effect on the greenback and helped gold. Regular trading began with a spike up to $1,115.50, which reversed by 8:30. A partial recovery followed. As of 8:49 AM ET, spot gold was at $1,112.90 for a gain of $9.60 on the day. The Kitco Gold Index divided the gain into $4.20 for predominant buying and $5.40 for a weakened greenback. The U.S. Dollar Index fell to below 81 on the news, but pulled back up into a trading range centered at 81.09. As of 8:51 AM, it was at 81.08.

Gold's been performing unexpectedly well today, as yesterday's decline has been reversed. If it holds up today, then market internals are better than I had thought. There's still that overhang at $1,115 to deal with, but the price has moved fairly close to it. Today might be a good day for the metal.