Gold Creeps Up Overnight, Driven Down In Early Morning

The talks between the Grecian government, the European Central Bank, euro-region officials and the IMF have started and the markets haven't reacted well to them. The yield for 10-year Grecian sovereign debt has climbed well above 8%, and related CDSs have climbed to record levels. The spread between those bonds and German bunds is also at a record level. Ostensibly, the talks are about the austerity measures the Grecian government has to enact. There are fears that no bailout will result from the talks, which pushed down the Euro as well as gold.

The metal wasn't doing all that badly until the above news intruded. After dawdling around $1,140, the metal inched up to $1,143 by 12 AM ET. From 1:00 to 2:30, it managed to climb above $1,145. Failing to rally above that level, gold sunk back down to $1,143 before making another run at the $1,145 level. That second run, ending just after 6:00, barely touched it. At that point, prompted by a rally in the U.S. dollar, gold slid down to below $1,140. As of 8:08 AM, the spot price was at $1,140.00 even for a loss of $0.40 on the day. The Kitco Gold Index attributed +$2.60 to predominant buying and -$3.00 to a strengthening greenback.

The U.S. Dollar Index rallied well on the news about the talks, even though it has been inching up in the prior evening. After starting off the evening session slightly above the 81 level, the Index climbed up above 81.15 by 8:20 PM and stayed stuck around that level until 9:45. A pullback to 81.1 preceded a period of indecisiveness, followed by a run up to 80.2 that crested as of 1:05. A drop to below 81 provided the impetus for gold to make $1,145. Another period of indecisiveness followed, which was broken by a rally that started just after 6:00. From the 81.0 level, the Index shot up to a little above 81.3 before fluctuating between that level and 81.25. As of 8:15, it was at 81.28.

The morning Bloomberg report, as webbed by Business Week, didn't cover the more recent drop. Instead, focusing on its earlier-morning rise, the report says earlier gains resulted from gold being favored as an alternative to debt.

Gold climbed for a second day in London on demand for a hedge against risks in the debt market....

“We have Greece, there’s also questions about Ireland, Spain, and Portugal, and what about the U.K. deficit,” said Gerhard Schubert, head of precious metals at Fortis Bank Nederland in London. “Gold is what it says on the tin: a safe haven.”

The article also goes into the bigger gains made by both platinum and palladium.

Regular trading's first stretch pushed gold down further, even as the U.S. Dollar Index slumped. Seesawing downwards, the metal got down to $1,138 before recovering a little. As of 8:51, it was at $1,138.90 for a drop of $1.50 on the day. The Kitco Gold Index assigned +$0.60 to the predominant-buying category and -$2.10 to the strengthening-greenback category. With regard to the U.S. Dollar Index, it pulled back from the 81.25-81.3 level to around 81.2; as of 8:54, it was at 81.18.

So far, things are not looking very good for gold. A nice, if small, gain turned into a small loss as a result of the Eurocrisis intruding. The U.S. dollar is still the prime beneficiary of any jitters. As I said in yesterday evening's write-up, the gold market is going to be dicey this morning. How dicey will be revealed later in the day.