Gold Creeps Up After Yesterday's Gains

After yesterday's strong rally, gold paused in the overnight session. An attempt to rise, a little more than an hour after evening trading began, led to a double top at the $1,136 level that preceded a pullback down to about $1,133. From there, gold drifted down slightly until 11:15 PM ET, when it rose back up to $1,135. It stayed at just below that level until 4 AM. Then, a quick rally pushed the price up to $1,138; after some hesitation, the price fell down to $1,135 again before rising slightly to $1,136.50. A slight dip around 6:30 AM prefaced a ramp-up that took the metal up to $1,143.50. A pullback erased less than half the gain, and gold then crept upwards a little before pausing. As of 7:59 AM ET, the spot price was $1,138.60 for a gain of $4.10 on the day. The Kitco Gold Index divided the gain into $2.50 due to predominant buying and $1.30 due to greenback weakness.

The U.S. Dollar Index didn't fare all that well overnight. After marking time in the afternoon session, it fell down to below 80.3 in the evening. A slight recovery left it around the 80.3 level for the rest of the night (ET). The morning began with a dip down to 80.23 that turned into a rally that carried it all the way up to 80.553 as of 4 AM. That rally failed to hold, though, and the Index slid back down to 80.3 in a little more than an hour. Another rally took the Index only up to 80.4, at which it lingered until about 6:30 AM. The plummet that followed took it down to 80.191. Subsequently, the Index climbed back up to just below 80.4 in an advance that began raggedly but ended strongly as of 7:43 AM. The pullback that followed started slowly but gained momentum as it pulled the Index down to 80.3. As of 8:20 AM ET, the Index was at 80.31.

A Wall Street Journal article points to an expected step towards a resolution to the Eurocrisis and a weaker U.S. dollar as the reason behind the maintenance of gold's gains:

The euro appeared to have bottomed against the dollar for now and commodities overall are steady after rising late Tuesday and that is fueling more confidence in gold, traders said.

"Shorter-term players are reassured that the bottom in gold has been seen and are coming back into the market," said Mitsubishi analyst Tom Kendall. He added that Greek issues will remain important to gold-market psyche, and traders cautioned that if the euro weakens against the dollar then commodities, including gold, could struggle to hold onto recent gains.

The article also notes that holdings for the SPDR Gold Trust (GLD) increased yesterday to 1,111.56 tons.

That expected step, an announcement of an 4.8 billion euro austerity package by the Grecian government, was mentioned in a Reuters report that attributed the rise to a dropping greenback and currency-related fears in general.

"Gold is being used as a bit of an alternative to currencies," said Citigroup analyst David Thurtell. "It takes you out of dollar or euro exposure and puts you into a non-currency."

Gold is also benefiting from weakness in the dollar as it boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

Also in the report is a caution related to the Euro's recent strength, which could reverse because of U.S. recovery.

The decline for the U.S. Dollar Index ended just after 8:30 and gave way to a trading range between 80.18 and 80.25. As of 8:53 AM ET, it was at 80.2364. After regular trading opened, gold rose a few dollars an ounce before pulling back partially. As of 8:56 AM, spot gold was at $1,139.90 for a gain of $5.40 on the day. Kitco's Gold Index attributed $3.90 of the rise to the declining U.S. dollar and $1.90 to predominant buying. The ADP jobs report, saying that 20,000 private-sector jobs were shed last month, had little effect.

Gold's rise has effectively stalled, for now, and won't likely continue unless the U.S. dollar co-operates by dropping more. Still, the metal's up at a time when a backtrack would be expected; at least, yesterday's rise has been shown to be durable.