Friday, June 25, 2010

Gold Meanders Around $1,243, Then Climbs

There was little gold-related news overnight, and little overall movement in gold until a few hours before regular trading began. The continued appreciation of the renminbi didn't have much of an effect on the metal's movement. As night turned into morning, the fluctuations around the $1,243 level grew wider but there was no bias either way until after 5 AM ET: then, the metal started rising at a fast clip. As of 8:08 AM, the spot price was $1,251.50 for a gain of $8.20 on the day. The Kitco Gold Index attributed +$8.20 to predominant buying and -$0.90 to strength in the greenback.

The U.S. Dollar Index also meandered last night, until an upward trend starting around 3:00 AM got it up to 86. After peaking there, it pulled back to 87.75 before rising again. As of 8:14, it was at 85.86.

A Reuters report, webbed by NineMSN, says that gold's recent advance is due to worries about financial uncertainty and concerns about currency depreciation.
Markets were watching the cost of protecting Greek government debt against default, which rose to a record high on Friday, raising fears about default and a sell-off of Spanish and Portuguese debt, also seen to be vulnerable.

"Nobody is giving up on gold, there is too much uncertainty in the world," said Andrey Kryuchenkov, analyst VTB Capital.

"Gold is trading like a currency, people are not ready to liquidate their holdings, they are using price dips as buying opportunities -- that was the case at $1,230 support."
The article also mentions that disagreement over austerity and financial reform at the G20 meeting could help the metal.

An earlier Bloomberg report, as webbed by Business Week, mentions the same concerns that the Reuters article started off with.
“With European debt fears at the forefront again and U.S. rates set to remain low for some time gold will likely gain further support,” said James Moore, an analyst at in London....

“It’s normal to see consolidation after such a big move in prices,” Yang Shandan, a trader at Cinda Futures Co., said from Zhejiang today. “There are still many risks out there and gold’s safe-haven status will keep its uptrend intact. We’re still seeing a lot of investor interest in gold.”
Also mentioned is a 3.05 tonne gain in the holdings of the SPDR Gold Shares Trust ETF yesterday, from 1,313.13 tonnes to a record high of 1,316.18 tonnes. Increases in 10 gold ETFs totaled 6.6 tonnes.

A Wall Street Journal report, also webbed before the jump, references analysts as saying the gold pullback seemed to be over.
"The market now seems to have put the latest profit-taking correction behind," SEB analyst Bjarne Schieldrop said. "In addition, it has got renewed bullish ammunition from extended low U.S. interest rates as well as increased economic double-dip concerns."
The article also says gold could benefit from the G20 meeting.

For its final revision, the first quarter U.S. GDP-growth number went downward to 2.7%. One of the factors lowering the number was imputed inflation being notched up by 0.1%. Expectations for this revision had been for 3.0%. Despite the rising GDP deflator, the news has next to no effect on gold. Regular trading starting coincided with a slight pullback, which ended when gold hit $1,250 before blipping up again. As of 8:50, the spot price was $1,251.40 for a gain of $8.00 on the day. The Kitco Gold Index assigned +$8.40's worth of change to predominant buying and -$0.40's worth to greenback strength. The U.S. Dollar Index bobbed around, reaching 85.9 at the time of the GDP revision release but then falling to 85.75 before picking up again. As of 8:56, it was at 85.81.

Having settled around $1,250, gold has confirmed yesterday's breakout above $1,240. That rise, if built on, would actualy make gold come in with another weekly gain. Given how the metal acted yesterday, it might.

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