Gold Slips Down Overnight, Stabilizes

After spending some time churning between $1,158 and $1,160 as the overnight session began, gold slipped down to below $1,155 between 8:00 and 9:30 PM ET. Staying in the $1,154-$1,156 range until after midnight, the metal descended below the former level just after 2 AM and bottomed at $1,151.20 around 3:20. Pulling back up, the metal then rallied to above $1,156 before fluctuating a little above the $1,155 level. As of 7:56 AM ET, spot gold was at $1,156.20 for a drop of $2.40 on the day. The Kitco Gold Index attributed -$0.20 to predominant selling and -$2.20 to a strengthening greenback.

The U.S. Dollar Index did show a slight upwards bias early in the overnight session, but coalesced into a trading range later. By 8:40 PM, the Index has reached above 80.67 but then pulled back. Since that time, it didn't move below 80.5. It also didn't move above 80.7, except for about an hour's stretch between 2:25 and 3:20. Failing to break through, it settled back into the same 80.5-80.7 range. As of 8:03 AM, it was at 80.59.

A Reuters report ascribes gold's slump to renewed strength in the U.S. dollar, and the mildness of it to continued safe-haven buying. The Grecian mess was the cause of both.

“In European trade it has been the currencies, and in the U.S. more the speculative buying, expectations for safe haven demand and uncertainty over Greece that are driving gold,” said Peter Fertig, a consultant at Quantitative Commodity Research.

“It is when the U.S. market opens that gold is rising.” He said he expects data to show a rise in net long positions in U.S. gold futures this week.

“This is driving gold despite the sometimes weaker euro against the U.S. dollar,” he said. “The safe-haven buying and speculative expectation there will be such buying is leading to the rather stable and higher gold prices.”

Although not called attention to, the tendency for gold to rise in the regular session is a real change from earlier in the year. The article also mentions that holdings of the SPDR Gold Shares trust were unchanged yesterday; they're still at a record level.

The morning Bloomberg report, as webbed by Business Week, points to increases in scrap gold sales as a downward short-term driver for the metal.

Scrap gold sales increased this week after prices rose to a four-month high on April 12, said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. Gold has dropped 0.5 percent this week as the dollar rebounded against the euro, curbing demand from investors seeking an alternative investment.

“Looking at the weakness in the euro, a lot of people are looking for gold to dip before jumping in with buying,” Sin said by phone today. “Jewelry demand other than in China is also weaker.”

Also quoted in the report was another expert who said that safe-haven demand was likely to be muted because things aren't that bad right now; specifically, there's no inflation to speak of.

The U.S. March housing starts data were released; the overall figure was a stronger-than-expected 626,000. Expectations were for 610,000. February's was also revised upwards. The U.S. Dollar Index moved upwards on the news, but failed to break above 80.7. As of 8:45 AM, it was at 80.65 after reaching almost 80.69 as of 8:41. Gold, which has been hovering above $1,156 as regular trading opened, dropped more than three dollars an ounce before and after the news. As of 8:47, the decline was continuing; spot gold was at $1,153.00 for a drop of $5.80 on the day. The Kitco Gold Index split the loss into -$2.70 for predominant selling and -$3.10 for strengthening of the greenback.

The U.S. Dollar Index is still showing strength, suggesting that gold wil have a tough time in today's regular session. Renewed safe-haven demand may kick in, perhaps even some bargain hunting, but today's action looks like the preface to a down day for the metal. So far, anyway.