Gold Rises Slightly In Overnight Session

With no upsetting news to rock the gold market last night, gold held steady in overnight trading. It managed to tack on a little gain early this morning despite an early-morning surge in the greenback. The metal spent almost all of the entire night (ET) in the afternoon-established $1,120-$1,125 range, bumping against the top just before midnight. After a successful crawl above it, the metal sunk back down into it in the midst of a decline that started at about 1:30 AM and ended at about 3:15. At that point, the decline reversed and gold went back up above $1,125 to stay until about 8:00. A new range between $1,125 and $1,130 was established; gold slowly rose within its confines before fluctuating around the $1,126-7 level. It then dipped and challenging the new floor; that dip was prompted by a rise in the U.S. dollar. As of 8:07 AM, spot gold was at $1,124.70 for a gain of $2.50 on the day. The Kitco Gold Index put an 80-cent drop to a strengthening greenback and a $3.30 gain to predominant buying.

The U.S. Dollar Index has successfully surmounted 80.5, but also has had trouble rising well above it. Last night, the Index dawdled in a trading range with rising bottom whose ceiling was 80.6. Then, starting at about 1:30 AM, it rose at a fast clip; the rally ended at 80.859 at about 3:30 AM ET. However, the top of that rally turned into a spike; within an hour, the index was below 80.7. A relief rally brought it into a trading range between just above 80.7 and 80.75, which was broken on the downside in a swift drop that took it to 80.554 as of about 7:20. Since then, the Index rose back to 80.66 before pulling back. As of 8:19 AM ET, it was at 80.63.

The morning Reuters report, webbed by the Globe and Mail, said that the overnight rise was based on continued concerns in the Eurozone and a build on yesterday's technical rally.

Fitch Ratings said on Tuesday it still has a negative outlook on Portugal's credit rating, which heightened concern that peripheral euro zone economies may face debt problems similar to those of Greece.

“All the worries about the fiscal situation, and how that is managed, are being read as positive for gold,” said Credit Agricole analyst Robin Bhar.

“That should become a long-standing issue, as people are concerned about how governments in the euro zone are handling the whole fiscal situation.”

That item also benefitted the U.S. dollar, though, which has muted the rise of gold in greenback terms.

The same point is made in the morning Wall Street Journal Online report, which also notes that the metal remains at a near-record highs in Euro terms. A quoted analyst found a light side to the announcement that mainland China government isn't enthusiastic about buying gold at these prices:

"The clarification of China's position may dispel a popular but, to our view, erroneous hope that China will emerge as a major gold buyer," said HSBC analyst James Steel. But he said the comments shouldn't have a lasting bearish affect because a Chinese official also said the country will continue regular purchases of U.S. Treasuries—this should support a low interest rate and loose monetary environment in the U.S., an environment that supports holding commodities.

Also mentioned in the report is gold-market activity being unusually light. Perhaps the market is waiting for direction right now.

Good news on the base-metals front was the attributed cause for the slight rally according to the morning Bloomberg report, as webbed by Business Week.

“Gold’s getting a small lift from base metals,” said Jia Wei, an analyst at Jiangsu Suwu Futures Brokerage Co. The precious metal is “hovering in the $1,100 to $1,200 range as investors vacillate between liking and avoiding risk.”

Also mentioned in the report is SPDR Gold Trust (GLD) holdings being unchanged yesterday. The figure's still 1,116.12 tons.

As regular trading gets underway, gold has declined back into the old $1,120-$1,125 range as the U.S. Dollar Index continues to rally. The dip in the former was mild, as opening declines go: little more than three dollars an ounce. As of 9:01 AM ET, spot gold was at $1,124.80, for a gain of $2.60 on the day. The decline due to U.S. dollar strength was shrunk to -$0.45 by the Kitco Gold Index and the gain due to predominant buying also shrunk a little to $3.05. The U.S. Dollar Index has pulled back from a morning rally that took it up to 80.68; as of 9:02, it was at 80.60.

So far, the gold market has been directionless; any cues have come from fluctuations in the U.S. Dollar. PRC exports and imports have both grown at a faster-than-expected rate, leading to a shrinking of the trade surplus, but the gold market doesn't seem to care. Today might well be a quiet day.