Post-Panic Letdown Leaves Gold Below $1,200

The British election results indicate, as of the time of this writing, a hung Parliament. A day after the Grecian parliament voted for the austerity package, the German lower house has voted to approve the German government's contribution to the bailout package; the tab for the German government will come to 22.4 billion Euros. This vote, if ratified by the upper house, will mean the German government has joined the French and Italian governments in approving the bailout.

After reaching its 2010 record yesterday, gold tailed off in the overnight session. The absence of new fears led to some relief selling. The drift-down was fairly steady until gold dipped below $1,200 around 11 PM ET. Hanging around $1,200, the metal climbed up slowly from that level between 2:00 AM and 4:00. That rally failed to last, and gold sunk to well below $1,200. But, that level ended up being the centre as the decline reversed course starting at 5:00. Again, an attenpted rally above $1,200 came to naught. As of 8:15 AM, the spot price was at $1,197.60 for a drop of $11.20 on the day. The Kitco Gold Index attributed +$4.60 for weakening in the grenback and -$15.80 for predominant selling.

The U.S. Dollar Index, failing to get above 85 in the evening session, drifted down itself. Two attempts to surmount 85, one at 9:50 PM and another at 1:55 AM, were thwarted. After the first, the Index drifted down to 84.5. There was hardly a pullback after the second until more than an hour later, when it sunk below 84.5 by 6:50 in a two-stage decline. A recovery rally followed, which pulled the Index up above 84.6. As of 8:23, it was at 84.62.

A Bloomberg report, webbed by Business Week, pegged last night's drop as the result of profit-taking. Demand shot up in Europe yesterday, particularly for physical metal.

“Gold has been firmer than any other assets of late,” said Paul Yamamura, a metals trader with Sumitomo Corp. in Tokyo. “There could be more correction on the downside should people want to lock in some gains. It could be sold off a bit, but will regain strength before too long.”

Also mentioned is the SPDR Gold Shares Trust's holdings making a new record. Those holdings leapt up 19.78 tonnes to reach 1,185.79 tonnes.

The morning Reuters report, as webbed by the Globe and Mail, also ascribed the dip to profit-taking. The experts quoted therein were still optimistic, like this one:

“Certainly a pull-back in this market is more than likely, but the overall trend for gold is higher,” said Peter Hillyard, head of metals sales at ANZ Bank in London. “Gold’s run-up is related to the various economic themes running through Europe.”

“It is a question of people being fearful of what is happening to the euro and a recognition of the financial mess that people find themselves in,” he said. “That has people focusing more on what is a reasonably safe haven, and that is gold.”

However, the article mentions near the end that jewelry demand is softening.

The jobs figures for the U.S. economy were released, and they show an addition of 290,000 jobs in April. The unemployment rate edged up to 9.9% as the measured labour force expanded. Both figures were higher than expected. The U-6 rate also rose, to 17.1%. The news reversed a decline in gold that seemed to anticipate another result. From $1,197-8, the metal sunk below $1,193 before reversing course right at 8:30. A quick rally to $1,200 on the news didn't last, though. As of 8:54, the metal was at $1,195.80 for a loss of $13.00 on the day. The Kitco Gold Index assigned -$15.30 to predominant buying and +$2.30 to greenback weakness. The U.S. Dollar Index was boosted by the news, topping at 84.86 as of 8:35 after dipping down just before the release of the unemployment news. That rally fizzled, though, and the Index started churning. As of 8:58, it was at 84.73.

So far, gold has pulled back in a not very surprising manner. Absent any drivers, it's likely to stay down for today.