After Slight Dip Overnight, Gold Goes Nowhere

Given the news, the reaction of the gold market was surprising - unless the participants have already come to the conclusion that the announcement was inevitable. The Grecian government has formally requested a 45 billion Euro rescue package from the EU and IMF. The request was taken well by European stock exchanges but had no effect on gold, despite having some effect on the greenback. All told, it was an unusually dull day for gold.

The only move of consequence was at 7:00 PM ET, when gold went from $1,142 down to a little below $1,140; that move was greenback-driven. Since then, the metal's been hovering around the $1,140 level - between $1,138 and $1,142 - in a directionless trading range. Since the news of the request was released, there's been a bias towards the upper end of that range but no real movement outside it. The metal did spike up to $1,144.20 on the news, and did reach $1,137.40 just before 2:00 AM, but pulled back to the range in both cases. Given that just below $1,142 was around where it closed, after some dawdling near there, it can be said that the $1,138-$1,142 trading range has held since early yesterday afternoon. As of 7:59 AM ET, spot gold was at $1,140.50 for a drop of $0.80 on the day. The Kitco Gold Index attributed -$1.50 to predominant selling and +$0.70 to a weakening greenback.

The U.S. Dollar Index has an exciting night, both ways, in contradistinction to gold. It got up to well above 82 as of 7:10, subsequent to rallying a little earlier in the evening. It actually peaked at 82.1 as of 7:25, but that peak proved to be a spike. After dropping to just above 81.9, the Index made another run at 82 which was briefly successful but failed to stick. The decline from that peak went lower, to about 80.875. A third attempt at rallying, which peaked at 2:20 AM, barely made it to 82. And then, the bailout-request news started making its way to the market. In a little more than two hours, including a climactic bottom, the Index got pummeled to below 81.5. It didn't stay there; a relief rally pulled it up to almost 81.7. As of 8:17 AM, seemingly shrugging off the news, it was at 81.69.

A Bloomberg report webbed by Business Week pegs the influence of the bailout request as negative for gold, as it should put out a fire that's been keeping the metal up.

“Certainly the immediate high wave concerns regarding Greece are now in calmer waters,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Gold prices should trend lower.”

On the other hand, a Wall Street Journal report jibes with my own take above: gold was essentially flat.

Spot gold held steady amid uncertainty over how Greece's decision to request financial aid would play out.

"Everyone is looking at the Greece story; gold is a range market with all the problems happening," said Afshin Nabavi, head of trading and physical sales at MKS Finance.

The article also mentions that holdings of the SPDR Gold Shares trust (GLD) dropped by 0.91 tonnes yesterday, and quotes two other analysts to the effect that gold's currently in a range but could move upwards.

More data has come from the U.S.-economy-watching machine, specifically durable-goods orders. March new orders for those goods dropped 1.3%. The data were better than that figure looked, however: a plunge in aircraft orders brought the figure down. Ex-transporation, orders rose 2.8%; for core capital goods, orders were up 4%, the strongest result since June. The spin on them was manufacturing is showing continued underlying strength.

The U.S. Dollar Index drew some benefit from the news, although a rally was already in place beforehand. Initially blipping up to 81.85, the Index pulled back a little before making a run at 81.9. As of 8:55 AM, it had sunk back to 81.84. Gold, in contradistinction, slumped several dollars an ounce. From $1,143 just before 8:30, the metal dropped to $1,138 by 8:45; it then paused, and then sunk a little further. As of 8:55, spot gold was at $1,137.20 for a loss of $4.10 on the day. The Kitco Gold Index split the drop into -$1.40 due to predominant selling and -$2.70 due to a strengthening U.S. dollar.

The story of the week is still the greenback, which shows little sign of slowing down now that the bailout-request news is out. Its run has taken a toll on gold. So far, anyways; the implications of a bailout haven't seemed to have sunk in yet, except for the possibility of others for Portugal and Spain to the detriment of the Euro. There's still the cost, and how they'll be paid for...