Gold Starts Off Week With A Yawn

Despite crude oil prices falling and the greenback rising, gold didn't changed all that much in overnight trading; the $1,100 support level wasn't broached. When the week's trading began last evening, gold rose slowly but didn't get up above $1,105 until night had turned into morning (ET). After spending the first two hours of the morning stuck at $1,105, the price rose above it only to fluctuate around it until 5 AM ET. A drop down to $1,102.10 was mostly reversed, and gold spent more than an hour at $1,104. Then, at 7 AM ET, it made a run all the way up to $1,109.30, but fell back somewhat since. As of 7:57 AM, spot gold was at $1,105.70 for a gain of $4.20 since Friday's close. The Kitco Gold Index attributed a $7.95 gain for predominant buying and a $3.75 loss for strengthening in the greenback.

The U.S. Dollar Index started gaining last night, and added to it after an early-morning slump. A run from 8 PM to just before midnight took the Index from 79.7 to almost 80. A subsequent trading range turned into a drop to just below 79.85 by 3:30 AM. Then, it rallied all the way above 80.15 before falling to 80.05. A slight recovery put the Index at 80.08 as of 8:12 AM ET.

A Reuters report centers around a rumour that the gold market didn't take a liking to: the proposed EMF being funded by some of the Eurozone member's gold reserves.

German magazine Focus reported on Saturday that the finance ministry was considering the possibility of euro zone countries using their central banks' gold reserves to back such a fund. "A proposal from the finance ministry suggests pooling the gold reserves of the former central banks of euro zone countries in a
stabilisation fund," Focus wrote.

"Gold prices are likely to be capped in the near term with worries about European central banks selling gold to help Europe's fiscal problems," said Kazuhiko Saito, chief analyst at Tokyo's Fujitomi Co Ltd.

Also mentioned in the report is the overall caution that's crept in to the gold market, prompted by Asian bargin-hunting buyers turning into scalpers and anxiety over central bank meetings this week.

Another story, and a forecast, headed up a Bloomberg report webbed by Business Week: Moody's warning about the U.S.' and U.K's AAA credit rating.

The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, said Moody’s Investors Service. Economists from Morgan Stanley said they expect “multiple” increases in China’s bank-reserve ratio requirements, with the next one “imminent.”

A quoted analyst said that futher tightening by the People's Bank of China should be bullish for gold:

“China will raise interest rates and continue to increase the reserve requirement ratio” for banks, said Wu Zhengzheng, analyst at China International Futures Co. (Beijing). “Gold will be supported as long as uncertainties about the economy remain.”

Also mentioned in the report was the SPDR Gold Trust's holdings being unchanged on Friday.

There are reasons why gold may advance from here, but the market hasn't taken that much to them as of yet. After regular trading opened, gold slid down to the $1,105 level, dipped slightly below as of 8:30, but climbed right afterwards. That rise didn't add much to the metal's price. As of 8:52 AM ET, the spot price was $1,106.90 for a gain of $5.40 since Friday's close. The two categories in the Kitco Gold Index both widened: +$9.75 for predominant buying and -$4.10 for greenback strength. The U.S. Dollar Index has strengthened a little, getting well above 80.1 before slumping slightly below. As of 8:55, it was at 80.09.

So far, things have gone well for gold. The rest of the day will show if the recovery from last week's rout will continue.