Monday, June 28, 2010

Gold Fluctuates Around $1,255, Dips

The G20 summit has ended. Despite the "excitement" in the streets of Toronto during it, there was little action in the gold market after it. The renminbi dropped slightly because no statements were released about the PRC's revaluation policy.

Gold sunk slightly after trading for the week began, to around the $1,255 level. Climbing a few dollars after 8 PM ET, it sunk back and hovered around that same $1,255. A fall at 3:00 turned into a rally that peaked when the metal hit $1,260.40; afterwards, it fluctuated between $1,256 and $1,258. As of 8:05, the spot price was $1,256.00 for a gain of $0.30 since Friday's close. The Kitco Gold Index attributed +$1.80 due to predominant buying and -$1.50 due to strengthening of the greenback.

The U.S. Dollar Index, after dropping a little yesterday evening, ralled up to 85.5 by 3:35 AM. A double top at that level presaged a drop down to 85.25, which ended with a return trip up to 85.5 as the ceiling of a range whose floor was 85.4. As of 8:12, the Index was at 85.44.

A Bloomberg report, as webbed by Business Week, ascribed the modest rise to investors seeking wealth protection.
“Gold is the ultimate currency and the ongoing global currency substitution in favor of gold will continue,” Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland, said today in an e-mail. He forecast prices to rise to $1,300 an ounce in two months.
Also mentioned was a tracking of 10 gold ETFs showing increases of four tons in total last Friday, although the SPDR Gold Shares Trust's holdings didn't rise.

A Wall Street Journal report said that the safe-haven buying was induced by fears about economic growth.
"The G-20 was pretty much a nonevent," said Afshin Nabavi, head of trading and physical sales at Swiss trading house MKS Finance in Geneva.

Still, the summit didn't significantly ease the market's worries about sovereign debt in the euro zone and the U.S., which should underpin safe-haven demand for gold, said Swedish bank SEB. "All in all, the outcome of the meeting did not reduce the level of fear significantly," it said.

The savings rate for U.S. households increased to 4% in May as real personal incomes rose 0.5% while real spending rose only 0.3%. The former was slightly below expectations, while the latter was slightly above. The overall data continue to paint a picture of the U.S. consumer repairing the balance sheet. Gold dipped below $1,255 before the release, but the news itself added to the push-down; the bottom was found at $1,251.80 as of 8:40. The metal pulled back up somewhat but not enough to re-establish a gain. As of 8:52, the spot price was $1,254.00 for a drop of $1.70 since Friday's close. The Kitco Gold Index ascribed +$0.60's worth of change to predominant buying and -$2.30's worth to greenback strength. The U.S. Dollar Index wasn't affected by the news, but it did manage to inch up slightly above 85.5 before pulling back. As of 8:55, it was at 85.47.

So far, it's been a tepid start to the week for the metal. Although still above $1,250, gold has slumped during the start of the pit session. An upwards turn may take place later, but there isn't any sign of it as yet.

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