Gold Soars To New Record

Gold started off the evening session drifting at $1,245. A blip-up just after 8:00 PM ET was not followed through upon; instead, the metal sunk to below $1,242 by 11:00. Recovering to just below $1,245, the metal ambled along in a tight range between it and $1,243 until 7 AM. Then, it rose above $1,245 slowly at first. Accelerating as it reached $1,250, it shot up once that level was breached. There was no fundamental driver accompanying that rise, suggesting that worries about Spain did it. The Spanish Prime Minister is scheduled to meet with the head of the IMF today. Peaking at a new record of $1,260.10, the metal fell back afterwards to settle above $1,255. As of 8:07, the spot price was $1,255.70 for a gain of $10.50 on the day. The Kitco Gold Index attributed +$10.60 to predominant buying and -$0.10 to strengthening of the greenback.

The U.S. Dollar Index sunk a little in the night part of the session, to 85.5 by 12:40 AM. Blipping up to above 85.7 by 3:00 AM, it tailed off and fluctuated at slightly below that level. As of 8:12, it was at 85.66.

A Bloomberg report ascribes the run to a record to wealth protection and concern over the U.S. recovery.

The metal’s “unique property as the ultimate safe-haven currency is making gold an attractive investment,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Gold’s recent price move is a function of euro-zone debt worries. Investors are looking to substitute assets and currencies with gold.”

An earlier Reuters report said that gold's hovering just below $1,245 was caused by a well-received auction of Spanish sovereign debt allaying fears about the Eurozone somewhat.

"The main driver behind gold is not the currencies; it is the underlying fundamental problems, especially here in Europe," said Commerzbank analyst Daniel Briesemann.

"Gold should rise further. It increased significantly yesterday. On a closing basis, gold in U.S. dollars reached a record high and intraday we were only $1 below the record high."

He said the prospect of publication of European bank stress tests was unsettling some market participants amid fears these could point to deeper problems in the financial sector.

Also mentioned is the SPDR Gold Shares Trust's holdings hitting another record high. The increase wasn't that much, though: 1.82 tonnes, for total holdings of 1,307.96 tonnes.

A pre-record Wall Street Journal report mentions fear of a derailed U.S. recovery as as a driver.

There are no statistical releases of importance to the gold market on Friday. Instead, market participants will be watching government announcements regarding banking stress tests. European Union leaders completed a dramatic about-turn Thursday, promising to carry out stress tests on their banks and publish their findings before the end of July.

But the medium-term outlook for gold remains intact. Fears are growing that the U.S. recovery could be grinding to a halt.

With regular trading open, gold fluctuated between $1,256 and $1,258 before inching above that level just before 8:45. A marginally higher record, $1,260.40, was made in the process. As of 8:51 AM, the spot price was $1,259.10 for a gain of $13.90 on the day. The Kitco Gold Index assigned +$14.25's worth of change to predominant buying and -$0.35's worth to greenback strength. The U.S. Dollar Index, after climbing up to 85.74, slumped back down but stayed in the range that held overnight. As of 8:54, it was at 85.67.

Gold has made another record, and has stayed well above $1,250, but the absence of a new driver may limit the gains next week. Still, it's in uncharted territory and may have further to run today.