The U.S. Dollar Index, after rising to above 84.8 in a largely choppy rally, started sliding after that peak was reached as of 8:55 PM. The slide lasted several hours and was fairly steady until the end was closed in on around the 84.25 level. After the low itself was reached, the Index began trading choppily upwards in action that resembled a trading range. As of 8:09, it was at 85.35.
A Bloomberg report, as webbed by Business Week, pegs the earlier rise as fueled by the decline in the greenback.
“Everybody used to be so bearish on the euro, but it’s turned around,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London. “That could give a bit of help to gold. Some people may also come in and think gold’s had a nice correction and try to buy.”Also mentioned is the likelihood of the U.S. service sector slowing down.
“With gold touching its lowest close in over a month, we see these levels as a good entry point for fresh long positions,” Hussein Allidina, head of commodity research at Morgan Stanley, wrote in a report today.
A Wall Street Journal report has the same explanantion, but indicates gold may consolidate as traders reassess their longs.
Following a quiet day of trading Monday, where prices kept within an $8 range, the markets are expected to closely watch how Wall Street opens Tuesday after the U.S.'s July 4 holiday break.Also mentioned is the upcoming Institute for Supply Management report on the U.S. service sector, due out at 10 AM ET.
"Gold [is] holding above $1,200 a troy ounce; however, the lack of gains in European markets yesterday may suggest the negative sentiment will continue when U.S. markets reopen, with further consolidation likely in gold as investors and speculators par their stale longs," said Bullion Desk analyst James Moore.
An earlier Reuters Africa report credits physical buying for pushing gold up.
"What gold needs now is a fresh catalyst. It needs something to trigger it to go higher. We might be seeing investors cashing up to rebalance other markets," said Mark Pervan, senior commodities analyst at ANZ in Melbourne.Also mentioned is the state of the physical market in Hong Kong, which was less active. There was hesitation, according to one dealer there, because of fears that a U.S. double-dip recession would lead to selling of gold.
"There's certainly been a fair bit of disappointment that it was unable to break a fresh record high early last week," said Pervan, who pegged support at a May level around $1,170 an ounce....
"There's very good physical demand out of Indonesia and Thailand. Premiums now range from 40 to 70 cents," said a dealer in Singapore, who offered gold bars at a premium of up to 60 cents last week.
The start of regular trading saw a fall that has already begun, accentuated. From $1,206 when the pit session opened, gold free-fell about seven dollars to reach $1,199.00 right after 8:30. A recovery to $1,203 fizzled, but the metal stayed above $1,200. As of 8:55, the spot price was $1,201.80 for a loss of $7.10 on the day. The Kitco Gold Index assigned -$10.30's worth of change to predominant selling and +$3.20's worth to greenback weakness. The U.S. Dollar Index slumped to 84.2 by 8:25, but recovered to above 84.3 before fluctuating in the 84.26-84.32 area. As of 8:59, it was at 84.27.
So far, the shortened week hasn't been that cheery for gold. It may pick up later in the day, but no sign of that exists yet.