Wednesday, June 30, 2010

Gold Hovers Above $1,240

It was a quiet session. With little news to move gold either way, except for an ECB bank financing, the metal stayed above $1,240 but didn't get higher than $1,245 except for two brief intervals. Yesterday, the SPDR Gold Shares Trust's assets topped the $50 billion level but that milestone didn't move the metal much either. Around 5:30 AM ET, it sunk as low as $1,238.10 before rebounding; the subsequent rebound pulled it up to $1,246.70 just before 6:00. Other than those two extremes, the range held. As of 8:04 AM, the spot price was $1,241.50 for a gain of $0.70 on the day. The Kitco Gold Index attributed -$4.05 to predominant selling and +$4.75 to a weakening greenback.

The U.S. Dollar Index sunk below 86.0 last night, with most of the drop coming early this morning. Drifting down to the 86 level last night, the Index first sunk slightly below; it recovered above 86 between 4:45 and 5:20. Then, it sunk fairly rapidly to below 85.6. Bottoming at 6:20, the Index reversed course and climbed up somewhat. As of 8:11, it was at 85.79.

A Wall Street Journal report says the Euro's rise helped gold advance a little, with the same factor both helping gold in greenback terms and hurting the metal in safe-haven terms:
Lower-than-expected demand at the European Central Bank's three-month refinancing tender boosted the euro, helping gold in dollar terms but also easing demand for safe-haven assets....

Commerzbank analyst Eugen Weinberg said the gold market has become predominantly long and is therefore vulnerable to bouts of profit-taking.

Still, he predicted gold would rebound through the second half of the year as the metal continues to benefit from the weaker global growth outlook and uncertainty on whether the euro zone's austerity measures will succeed in bringing down high government-debt levels.

"Gold might prove to be the safe haven many people are looking for," he said. "I wouldn't be surprised to see us at $1,300 by year's end."
The article also notes that holdings of the SPDR Gold Shares Trust increased to a new record high of 1,320.44 tonnes.

A Reuters report cited the same low demand for ECB bank refinancing facilities as the reason for it giving up its earlier gains.
The euro jumped and gold dipped briefly lower after the European Central Bank said it lent banks a lower-than-expected 131.9 billion euros ($161.4 billion) in three-month funds at a tender on Wednesday.

The process was closely watched, as banks face the repayment of close to half a trillion euros in 12-month funds later this week. Analysts said the relatively low demand should help ease fears over bank finances which have rocked stock markets this week.

European shares also turned positive in the wake of the tender, stabilizing after steep falls a day earlier....
The article also mentions that Indian demand is lackluster, but so is supply from scrap sales. Hong Kong premiums for gold bars rose.

A Bloomberg report, as webbed by Business Week, said gold was little changed. The report was written prior to the bank refinancing.
“Sentiment is still sour,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Scrap selling has also been fairly limited because most players fear more upside to prices amid ongoing uncertainty.”

“Demand for gold as a safe haven will remain strong, which should oppose any major declines in prices,” Eugen Weinberg, head of commodity research with Commerzbank AG, wrote in a report. “Due to the currently high price level, profit-taking by short-term oriented investors is increasing.”
Also mentioned is the fact that the metal is on track for a seventh quarterly gain in a row, the best streak since 1979.

The June ADP report for private-sector jobs was released at 8:15, revealing a number lower than expected. Equity futures did not react well to the 13,000 jobs gained number, nor did the gold market. When regular trading opened, the metal dropped from above $1,243 to below $1,237, reversing course around 8:30 AM. Despite that reversal, it stayed below $1,240. As of 8:53, the metal was at $1,239.70 for a loss of $2.00 on the day. The Kitco Gold Index assigned -$5.20's worth of change to predominant selling and +$3.20's worth to overall greenback weakness. The U.S. Dollar Index reacted positively to the number, rising above 85.9 by 8:20. Pulling back a little, it rallied above 85.9 again but did not reach 86.0. As of 8:56, it was at 85.92.

Gold has not had a great day so far, not even a particularly good one. Still, its performance hasn't been all that bad. It's held its own, which provides reassurance if not optimism.

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