Gold Rises Overnight, This Time Helped By Falling Greenback

A higher-than-expected reading from Germany's ZEW Institute Sentiment Index helped push the Euro up, leading to the U.S. Dollar Index sinking in overnight trading. Moody's is continuing to warn about the sovereign debt of certain sovereign nations, particularly the United States: the latest missive warns them to cut spending or risk losing their AAA credit ratings. The Fed meeting takes place today, and the gold market may be handicapping a stay-the-course decision.

Gold rose steadily, although intermittently, overnight. The metal took a dip right around 7 PM ET last night, when Sydney trading opened, but that dip reversed itself; gold stayed in a trading range bordered by $1,108-$1,110 until 11:30 PM. Then, it rose to a more raggedy range that was centered around $1,112. It didn't break out of this formation until it touched $1,114 at 6 AM. Its rise from that point was hesitant, and didn't last. As of 8:02 AM ET, spot gold was at $1,112.90 for a rise of $4.10 on the day. The Kitco Gold Index divvied up the rise into $2.70 due to a weakening greenback and $1.40 due to predominant buying.

The U.S. Dollar Index spent most of the night sliding. An attenpt to rally between 7:10 and 7:40 came to naught. As night turned into morning, a trading range was established between 80.065 and 80.13 that was broken by a rally starting just before 3 AM. It lasted for about forty-five minutes, taking the Index up to 80.315. After some hesitation, it slid downwards in three bursts that took the Index well below where it was as of midnight. At 8:17 AM ET, the Index was at 80.06.

A Wall Street Journal article starts off with a mention of the upcoming Fed meeting, and then explains why gold has been rising lately:

The precious metal has decoupled somewhat from its correlation with the U.S. dollar in recent days and is being supported by a combination of physical buying, technical trading and a feeling of renewed risks in the broader market.

However, traders and analysts said the metal will likely stay in a tight range for now with many investors sitting out of the market.

However, traders expect gold to stay in a trading range between $1,090 and $1,140 at relatively low volumes as it's still hobbled by the strong U.S. dollar and relatively weak investment demand.

The morning Bloomberg article, as webbed by Business Week, points to EU talks concerning indirect aid to Greece.

European officials worked out a strategy for emergency loans in case Greece’s plan for 4.8 billion euros ($6.6 billion) in tax increases and wage cuts isn’t enough, without giving precise details....

“There is still concern about the euro policies,” said Bernard Sin, the head of currency and metals trading at bullion- refiner MKS Finance SA in Geneva. “There’s some physical demand at $1,100 an ounce that’s been supporting the market.”

Also mentioned is why plantinum has moved into the spotlight that used to be occupied by gold: the industrial component of the demand for the former is stronger, and is expected to benefit more from global recovery.

Worries about sovereign debt and and future inflation helped push gold up in an atmosphere of declining risk appetite overall, according to a Reuters article webbed by the Globe and Mail.

Société Générale analyst David Wilson said the safe-haven appeal of gold was starting to come into play again, as the metal benefited from a flight to quality among investors.

“The combination of nervousness of debt and inflation is benefiting gold,” he said....

Commerzbank analyst Eugen Weinberg said the increased focus on growing government debt piles was underpinning interest in gold.

“It is helping the market because, if you are looking for security, you buy gold,” he said.

Amongst other factors, it brought up the growing trade row between the U.S. and the PRC over the renminbi peg to the U.S. dollar.

As regular trading opened, gold took off. Hovering around $1,113 until 8:30, gold got a boost from the release of the housing-construction number in the U.S.: for February, it dropped 5.9% to 575,000 units due to severe weather. January's figure was revised upwards, adding to the percentage drop for February. Gold added more than three dollars an ounce in ten minutes. As of 8:54 AM ET, the spot price was $1,116.60 for a gain of $7.80 on the day. The Kitco Gold Index attributed $2.80 to a weakened greenback and $5.00 to predominant buying. The U.S. Dollar Index was little affected by the news, but was down all the same; as of 8:57, it was at 80.

Gold's off to a good start. Whether or not it has a good finish will be seen over the course of the day.