Gold Drifts Overnight

Last night's trading in gold was slightly on the bull side, but not by much. An initial dip right after the start of evening trading was followed by a recovery to just above yesterday's closing price, but another dip carried the price down to below $1,131 as of 7 PM ET. From there, gold drifted slightly upwards until a small rise at 9 PM carried the price above $1,132.50. An announcement from the PRC government - specifically, from Premier Wen Jiabao - threatening further clampdown measures on China's overheated property market didn't move gold at all. Although People's Bank of China tightening was suggested as one of the possibilities, perhaps the emphasis on tax measures made gold traders inert to it. Or, perhaps, gold traders are used to think of government pronouncements as hot air until measures are actually implemented.

The upward drift continued as night turned into morning; by 1 AM ET, gold was bumping against the $1,135 level. A downturn over the next forty-five minutes brought the price down to $1,131.40, but an uptrend commenced that did manage to break through $1,135. After touching $1,137.40 at 5 AM, gold again drifted downwards - but only to $1,133.50. That gentle downdrift was followed by a gentle updrift that ended just before 8 AM. As of 8:03, spot gold was at $1,133.50 for a gain of $1.00 on the day. The Kitco Gold Index allocated +$1.40 for predominant buying and a 40-cent drop due to strengthening of the greenback.

The U.S. Dollar Index didn't do all that much in last night's trading. After staying in a trading range centered around 80.55, the Index dropped to well below 80.5 at about 9 PM. After climbing slightly upwards from there, the Index vaulted upwards to above 80.62 between 1 and 1:45 AM. A turnback led to another rally attempt, which spiked at 80.63 just before 3 AM. A quick three-stage downtrend took it down to 80.453 by 5 AM. Since then, the Index recovered to well above the 80.55 level. As of 8:14 AM ET, it was at 80.57.

A Wall Street Journal article says that the gold market is shifting attention from Euroland to the U.S. as the Grecian crisis fades from immediate awareness. Not for the same reason, but for U.S. economic numbers that will give direction to the U.S. dollar. Dollar bulls are beginning to be quoted in the gold reports, like this one:

"Investor sentiment in the gold market appears to have changed relative to the beginning of the year with renewed net buying in gold futures and ETF," said Anne-Laure Tremblay, an analyst at BNP Paribas.

"On balance for the year however, we see gold progressively eroding from current levels as we expect the dollar to firm significantly relative to the euro and other currencies," she said.

The article also mentions that holdings for the SPDR Gold Trust (GLD) remained unchanged yesterday.

Euroland was the focus of a Bloomberg article webbed by Business Week, with James Moore noting that gold may benefit from the continuing Grecian crisis as the implications sink in.

“Issues over Greek and European Union member debt continue to draw investment demand,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. Precious metals will likely “consolidate” recent gains as traders await today’s monthly U.S. employment figures, he said.

The report also summarized a Euroland drive for contingent rescue measures to help out Greece, in order to keep the IMF out of the picture. Given the German demand of not a centieuro in cash, it's likely to be a loan guarantee or other form of indirect support.

A Reuters article has some handicapping of the non-farms payroll number that was released at 8:30, with the weather expected to be the main driver for an expected fall of about 50,000. The dollar easing against the Euro was the reason given for gold's firmness.

That easing ended when the actual number was released. The unemployment rate is still at 9.7%; non-farm payrolls dropped only 36,000. Marketwatch's consensus expected fall was for 80,000; the unemployment rate was expected to rise to 9.8%. The broader U6 number, however, increased to 16.8% from 16.5% last month.

The greenback market loved it. The announcement was good enough to push the U.S. Dollar Index up to 80.82 from 80.6. A quick pullback to 80.63 was reversed as the Index shot up to 80.885 by 8:37 before a backtrack settled in. After bobbing between $1,133 and $1,134, gold lost a quick six dollars an ounce on the news. Encouragingly, gold managed to recapture almost all of the loss between 8:37 and 8:45.

As of 8:52 AM, the Index was back to 80.69; gold was clocking in a gain on the day. The spot price was $1,333.00 for a rise of 50 cents. Kitco's Gold Index subtracted $2.50 from the price for U.S. dollar strength, leaving a full $3.00 gain due to predominant buying. It's only a matter of time before this phenomenon is referred to, in the greenback zone, as a stealth bull market.