Monday, April 26, 2010

Gold Fluctuates, Mostly Downwards In Early Morning

Gold spent the first overnight session of the week in a range, from $1,155 to $1,160. That range was broken on the downside early this morning, from 5:00 AM ET to a little after 6:00, after a three dollar an ounce drop kicked in at 4:00. The low was $1,152.30, made right after 6:00 as the range-breaking downtrend seemed to pick up momentum. After reversing, the price stayed a little above $1,155; as of 8:04 PM ET, spot gold was at $1,156.30 for a drop of $1.20 since Friday's close. The Kitco Gold Index attributed -$1.80 to a strengthening greenback and +$0.60 to predominant buying.

The U.S. Dollar Index stayed in a range between 81.3 and 81.5 until 4:20 AM, when it broke above. Forty-five minutes earlier, there was an attempted break on the downside which didn't last. The Index bottomed at 81.25 before starting a run that carried it up, after a half-hour pause around the 81.5 level and another one above 81.6, to 81.7 by 6:10. Topping at that time, it pulled back to the 81.5 level. As of 8:14, it was at 81.54.

A Reuters report mentions the early-morning downturn as caused by a dockworkers' strike in Greece as a protest against the austerity package, but attributes the recovery to concerns about that same nation's finances.
The combination of risk-averse buying and euro weakness took euro-priced gold to a record 868.26 euros an ounce....

"Gold tends to attach itself fairly reliably to the euro until there is something going on that causes a detachment," said Peter Hillyard, head of metals sales at ANZ Bank in London.

"Demand is coming from the investor community," he said. "It is a view being held by many -- a technically held view, a currency view, a Greek view if you like -- that $1,250 is where this market is headed, probably between now and year-end."
Noting that both the U.S. dollar and gold are up, the article attrubutes the rise in both to safe-haven demand.

Uncertainty about the timing and conditions of the bailout package for the Grecian government weighed on gold, according to the morning Wall Street Journal report.
How the Greek situation plays will have ramifications for gold, said HSBC precious metal analyst James Steel. If the Greek crisis is peaking, a negative for gold may be removed and the way left open for further gains, he said.

He noted gold hit new highs in euro terms, indicating underlying strength.

"If aid to Greece and a shift to long-term restructuring of Greek government finances are seen as signaling that the worst of the crisis is passing, then investor risk appetite may recover and gold can continue to rally," Steel said.

For now, however, there is still uncertainty over the Greek bailout and that is weighing in the euro and gold prices, [James] Moore [of] said.
Another quoted expert said that gold is likely to trade in a range as long as the bailout implementation is clouded.

The Bloomberg report, as webbed by Business Week, notes that the greenback rose because Finance Minister Wolfgang Schaeuble told a German newspaper that the German government could still reject any aid package for the Grecian government. The experts quoted were moderately bullish, but were also cautious in the near term due to the fluidity of the Grecian mess.

The opening of regular trading had little effect on gold. After a dive down to $1,154 at the open, a rebound took it up to $1,157 before the price stabilized at a slightly lower level. As of 8:52 AM, spot gold was at $1,156.40 for a drop of $1.00 since Friday's close. The Kitco Gold Index assigned -$1.80 to strengthening of the greenback and +$0.80 to predominant buying. The U.S. Dollar Index, after an attempted run that crested at 81.58, slumped below 81.5. As of 8:56, it was at 81.46.

So far, gold's action is consistent with the overall expectation for a near-term trading range. Trading on the first day of this week will show if that range-bound action continues.

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