Tuesday, April 27, 2010

Gold Continues To Slip Down

The metal had a nice run last night, gaining almost four dollars an ounce from yesterday's close when it topped out around 9:00 PM ET. From that point, though, the action was mostly downwards. A three-stage overnight downtrend took it below $1,151 a littel before 6:00 AM from last night's peak of $1,157. After a recovery to $1,152, a final drop took the price down to $1,149.30 around 7 AM. Another recovery prefaced yet another low on the day. Largely behind the drop was uncertainty over the stringency of the conditions on any aid package for the Grecian government, which dropped the Euro and benefitted the U.S. dollar. As of 8:03 AM, spot gold was at $1,148.70 for a drop of $4.30 on the day. The Kitco Gold Index apportioned +$3.30' worth of change to predominant buying and -$7.60' worth to strength in the greenback.

After a slump that ended at 7:15, which took it down to just above 81.15, the U.S. Dollar Index went on a sustained rally that took it above 81.75. Part of the rally took place last night, before news from Euroland affected it, but most of the rally did occur during the Euro news cycle early this morning. From an intermediate low of 81.275 as of 12:45 AM, the Index inched upwards at first and then jacked up as the latest Eurocrisis news and rumours disseminated. By 6:35 AM, it was slightly above 81.7; later, a pullback led to a new high. As of 8:11 AM, it was at 81.75.

The morning Wall Street Journal report ascribed last night's drop to the above-mentioned causes, and notes that the consensus impression is for a range between $1,140 and $1,160.
"As long as the euro struggles, and by that the dollar remains strong, it's difficult to see rallies above $1,160 an ounce [being] sustainable," said Standard Bank analyst Walter de Wet. He noted that the metal will continue to outperform in euro terms. Spot palladium is trading down along with the euro after hitting a fresh two-year high Monday.

Markets are likely to be cautious ahead of the two-day U.S. Federal Reserve interest rate committee meeting that begins Tuesday, said analysts at SEB.
Another quoted source said that gains in gold are likely to be capped as long as the greenback benefits from the current turmoil in Euroland.

An earlier Reuters report, written last night, focuses on the still-existing safe haven demand for gold as a result of the Eurocrisis. Even when things were looking good, though,
buying has faltered whenever gold nears a four-month high of $1,168.70 marked earlier this month, capping further gains in the precious metal with the outlook of global economy remaining uncertain, analysts said.
Highlighted in the report was a new record high in the SPDR Gold Shares trust's (GLD's) holdings of gold. Yesterday, they increased by 6.088 tonnes to 1,146.216 tonnes.

The morning Bloomberg report, as webbed by Business Week, points to scrap-gold sales meeting investor demand to keep the price from rising.
Sales of old jewelry and other scrap gold have increased at the same time as demand from investors gained, according to Walter de Wet, an analyst at Standard Bank Plc in London....

“Investment demand is there but we’re also seeing decent physical selling” of scrap metal from Asia, de Wet said. “Investment demand must be much bigger than people wanting to sell old gold” for prices to advance.
The greenback's rise was attributed to "speculation Greece won’t get a loan quickly enough to avoid default on its bonds." This report also made special mention of the new record in GLD's holdings, a datum that seems to be growing legs.

With the opening of regular trading has come fluctuations that were directionless. Gold has yo-yo'ed between $1,148.50 and $1,150.50. As of 8:50 AM, the spot price was $1,148.70 for a drop of $4.30 on the day. The Kitco Gold Index assigned +$3.80 to predominant buying, reflecting safe-haven demand still extent, and -$8.10 to a strengthening greenback. After sliding down a bit, the U.S. Dollar Index went on to a new daily high. As of 8:53 AM, it was at 81.79.

Due to that strength, gold hasn't been doing so well even though it's still up ex-U.S.-dollar. The way things have gone so far, the metal's likely to put in a loss on the day.

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