Gold Spends Overnight In Trading Range

The Euro has come under some pressure because of worries over EU aid forthcoming to the Grecian government. The latest round in the U.S.-PRC currency spat was played by the U.S. ambassador to mainland China, who urged that PRC officials be "calm" and "rational" about the matter. He also urged de-linking from recent U.S. activities that have affronted some of the PRC leadership, such as selling arms to Taiwan. The PRC has agreed to poll a thousand manufacturers on the effects a rising renminbi would have on their concerns.

Through it all, gold remained in a trading range between $1,120 and $1,125 in the overnight session. Yesterday's closing price didn't hold, but the resultant drop wasn't much of one. The range was briefly broken on the downside near 4 AM ET, with the low of $1,117.80 coming in right at 4:00, but it reversed and the range was restored. More recently, as of about 7 AM, it was broken on the upside. As of 8:11 AM ET, spot gold was at $1,125.40 for a loss of $0.20 on the day. The Kitco Gold Index assigned +$3.80 due to predominant buying and -$4.00 due to strengthening of the greenback.

As indicated above, the U.S. Dollar Index did gain overnight; it was not in a trading range then. After spending some time in a slightly rising channel, it jumped up at 8:40 PM but slid back down into that same channel. Just before 1 AM, it was just below 79.8. Then, it commenced a rise with a jump that carried it above 79.9 within ten minutes. By 4 AM, it was at the 80.1 level. In the next two hours, it pulled back to 79.9 but rose subsequently to around 80. As of 8:20 AM ET, it was right on 80.

A Reuters article pegs the range as established by rising safe-haven demand offsetting the gains in the greenback. The latter was attributed to a statement from the Grecian government expressing lack of hope that aid will be forthcoming from the EU.

Concern over the fiscal health of the debt-laden Mediterranean country has weighed on the euro so far this year, though it has sparked safe-haven flows into gold.

"Gold's short-term correlation (30-day basis) with the euro-dollar declined over the past week...but this can easily reverse," said BNP Paribas analyst Anne-Laure Tremblay.

"This morning, the euro resumed its slide versus the dollar as Germany remains reluctant to provide financial help to Greece and the possibility of recourse to the IMF has once again surfaced."

"In view of euro zone issues, gold, because of its safe haven appeal, has likely seen support as a result," she added.

Another analyst quoted said that gold's held up pretty well, but its overall direction has been neutral.

The morning Bloomberg report, as webbed by Business Week, presents a gloomier interpretation of the greenback's rise.

“The weaker euro has lent further pressure to gold and silver this morning and will continue to provide short-term direction,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. While a drop below the 100-day moving average at $1,118 “could trigger additional technical related pressure,” dips will likely find “strong support.”

An example would be the dip that occurred at 4 AM.

The U.S. CPI numbers were released at 8:30, along with the U.S. jobless-claims data. The latter show a drop of 5,000 to 457,000; it was in line with expectations. The raw number from the former was flat; overall, the CPI changed 0.0% in February. That's exactly what economists were expecting, believe it or not. The core CPI, excluding food and energy, went up 0.1%.

In the past year, the CPI has risen 2.1%. The core rate is up 1.3% in the past year, the smallest year-over-year increase in six years

So, there's a little inflation but not that much.

Both the U.S. Dollar Index and gold markets took these data in stride. The Index weakened slightly, falling below 80 but not by much. Its low was above 79.9, and its losses were mostly shaken off within twenty minutes. As of 8:52 AM, it was at 79.97.

Gold rose somewhat on the news. After a pre-announcement handicapping rise of about two dollars, which lost a dollar just before announcement time, gold added $1.50 right at 8:30 but ended up giving it back. No real boost was given by the data. As of 8:55 AM ET, spot gold was in gain territory, but just barely: $1,125.50 for a rise of $0.40 on the day. The Kitco Gold Index assigned +$3.90 for predominant buying and -$3.50 for U.S. dollar strengthening. It could be said that the $1,125 resistance level is now overcome.

Still, the above indicates that today might be a slog day for gold. With no immediate driver on the horizon, the metal might put in another trading-range session.