The U.S. Dollar Index, after an early evening rally, went on a decline that stretched over night and early morning and didn't end until the Index reached 86.35 as of 2:00. Subsequently, it rallied all the way back up to the level it had reached as of 7:15 PM more than twelve hours later. Peaking at just below 86.85, the Index slumped back a little and settled near the 86.7 range. As of 8:10, it was at 86.69.
A Bloomberg report, webbed by Business Week, ascribed gold's fall to increased risk appetite as equity markets look more appealing.
“In the short term, strength in equities could suppress gold prices,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. “If risk aversion is declining, this will not attract new buyers in gold.”...There was also some speculation about the central bank of Iran buying gold with some of the proceeds it will receive for getting rid of $45 billion' worth of Euros. Rather than being a political statement, the central bank is interested because the gold price is trending up. The article notes that the Russian, Indian, Mauritian and Sri Lankan central banks have all bought gold recently.
“Gold is in a unique position” to benefit from declining currency values, said Edel Tully, precious metals strategist at UBS AG in London. “We would need more heightened risk aversion to move significantly higher.”
A Reuters report notes that declining risk aversion was largely balanced off by physical demand, limiting gold's overnight losses.
"Better macro sentiment, equity markets higher and the euro is off its lows -- all of this is contributing to some risk appetite coming back," said analyst Robin Bhar at Credit Agricole.The article also mentioned that holdings for the SPDR Gold Shares Trust increased, marginally, to a new record high of 1,268.54 tonnes.
"In that sort of environment, you'd expect gold to be slightly less attractive," he added....
But the underlying interest in gold remained intact, Bhar said. "The retail appetite is definitely there ... Maybe more dip demand as prices come back."...
In India, the world's top physical gold market, some jewelers stocked up as bullion prices dropped from a two-week high, while selling from other consumers in Asia also slowed, keeping premiums for gold bars steady.
"I think we need some news to push up gold. Otherwise we'll get stuck in a range of $1,200 to $1,225," said a bullion dealer in Hong Kong.
A Wall Street Journal report concurred with the others regarding an increase in risk appetite.
"As the euro has gone into a more stable phase versus the dollar, and rebounding equity markets stimulate risk-taking, the environment has become less favorable for gold," said Swedish bank SEB commodity analyst Filip Petersson.Also quoted was TheBullionDesk.com's James Moore, who cited the Iranian central bank as a possible driver of higher gold prices.
However, support for physical gold investments remains, and sentiment is fickle and could reverse in the coming days to again spur gold buying depending on data releases, traders and analysts said.
Two U.S. jobs metrics were released at 8:30: the ADP private-sector jobs figure and the weekly new-jobless-claims number. The former showed a gain of 55,000 jobs in May, making last month's figure the fourth in a row with an increase. Nevertheless, it was below expectations of a 100,000 gain. The latter figure showed 453,000 new claims in the latest week, down 10,000 from the previous week; that number was slightly better than expected. The data came on the heels of a slight recovery in gold as regular trading began: from a low of $1,215, it inched up above $1,218. As of 8:53 AM, the spot price was $1,218.30 for a loss of $5.90 on the day. The Kitco Gold Index assigned +$0.40's worth of change to greenback weakness and -$6.30's worth to predominant selling. After an attempt to get above 86.8, which fizzled, the U.S. Dollar Index slumped to below 86.7; as of 8:55, it was at 86.67.
So far, my call yesterday evening for a gain on the day has not matched up with gold's real performance. Although declining, the drop was limited by continuing buying interest. The regular session may contain a rebound, but it would be a surprise.