Gold Rises During Night, Dips In Early Morning

Things were relatively quiet in Euroland, except for relief at the PRC government's decision to stick with its Euro holdings, and there was no immediate driver to push the metal up in late-night trading. Nevertheless, it rose late last night when Sydney and Hong Kong trading were open. Initially blipping up, it fell to $1,210 before running up to $1,217 by midnight ET. A final blip-up around 1:30 AM pushed the price up to $1,219.80, after which it pulled back to just above $1,210. The rest of early morning trading took place in a range between that price and $1,215. As of 8:03 AM ET, spot gold was at $1,211.20 for a gain of $0.60 on the day. The Kitco Gold Index attributed -$8.30 to predominant selling and +$8.90 to a weakening greenback.

The U.S. Dollar Index fell well below 87 as the Euro recovered from its latest hammering; the PRC's decision caused the other currency's spring-back. The greenback's decline started right after regular trading began, and continued until 3:15 AM when the Index bottomed at below 86.4. Throughout that entire decline, it sunk more than a full point. Recovering afterwards, it fluctuated between 86.4 and 86.8 in an unusually wide trading range. As of 8:09, it was at 86.71.

A Bloomberg report, as webbed by Business Week, says that gold was little changed despite a general increase in commodities like copper and crude oil.

“Investors are shifting their portfolio into commodities,” said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “The financial situation in Europe is still not resolved yet.”...

“Investors are still concerned about” European debt, said Hwang Il Doo, a Seoul-based trader with Korea Exchange Bank Futures Co. “Gold will continue to be bullish.”

The article also mentions Deutsche Bank raising its estimates of gold's price for every year up to 2015. The forecast for this year's average was upped to $1,215. Also noted is a slight increase in the SPDR Gold Shares Trust holdings, which put the total up to a new record high.

Although concerns remain about sovereign debt, particularly Europe's, a Wall Street Journal report says gold didn't gain all that much because of a shift in risk appetite.

Lately, gold has tended to rise on euro weakness and fall on euro strength, the reverse of how it behaved for most of last year, said strategist Filip Petersson at SEB Commodity Research.

"Today the euro is trending higher together with global equities...thus gold is under pressure," Mr. Petersson said. "Reduced risk aversion during equity market rallies have also influenced gold negatively."

SEB said the underlying level of fear remains very high in the markets, with worries lurking over European sovereign debt and concern that governments' efforts to control the problems will crimp growth in the region....

A Reuters report pegged continued safe-haven demand as the reason for the the slight rise in gold.

Gains in gold were capped on Thursday, however, as the euro rose versus the dollar after Chinese officials denied a report the country may be distancing itself from euro zone debt holdings.

But bullion remained underpinned by expectations of further euro weakness as investors fretted the euro zone crisis might damage the region's banking sector.

Bullion dropped to a two-week low last week as investors sold the metal to cover losses in equities but analysts said the subsequent recovery showed sentiment was still bullish.

Interestingly, none of the reports mentioned tensions between the two Koreas, even though gold's rise last night took place with the Hong Kong and Sydney markets open.

U.S. first-quarter GDP growth was revised downwards to 3.0%, from 3.2%, and weekly first-time jobless claims fell to 460,000. To the extent to which these data had an influence, they aided a partial recovery from a downturn that started earlier in the hour. Starting at 8:10, gold fell from around $1,212 to below $1,207 by 8:30. Bobbing up a little, it reached $1,208.80 by 8:52 AM for a drop of $1.70 on the day. The Kitco Gold Index assigned -$9.00's worth of change to predominant selling and +$7.30's worth to greenback weakness. Despite that overall weakness, the U.S. Dollar Index was a clear beneficiary of the economic data. Rallying strongly starting at 8:30, it broke above the 86.8 top of its recent range to peak at 86.92. As of 8:54, it was still above that earlier ceiling at 86.85.

As sentiment improves for equities, gold is beginning to be left in the dust. In recent days, any drop at or just before the start of regular trading is made up for later in the morning; that trend may continue today. Still, there was hardly any base of gains to build on this morning unlike in the previous three sessions.