Wednesday, July 21, 2010

Gold, After Softening, Perks Up

Gold stayed above $1,190 until almost midnight ET, even though it softened from yesterday's closing level. A dip below $1,190 didn't lead to much of a further fall; the metal stayed between that level and $1,188 until a little after 5:00 AM. Then, it jumped above $1,190 and stayed around $1,191 until just before 7:00. Subsequently, a larger jump kicked in that took the metal all the way to $1,199.00 before exhausting itself by sinking to $1,195. The market seemed to be discounting favourable words from Ben Bernanke's upcoming testimony to Congress. As of 8:12 AM ET, the spot price was $1,195.70 for a gain of $3.50 on the day. The Kitco Gold Index attributed +$5.50 to predominant buying and -$2.00 to a strengthening greenback.

The U.S. Dollar Index spent last night fluctuating around the 82.72 level before sinking down to 82.55 around 2:20 AM. An attempted rally was aborted, making for a double bottom at that level, followed by a more sustained one that took the Index up above 83 before being spent. As of 8:19, it was at 82.94.

A Bloomberg report, as webbed by Business Week, says the recent rise has been engendered by an increase in physical buying.
“There’s been an upturn in physical buying, in Asia particularly,” said Dan Smith, an analyst at Standard Chartered Plc in London. “People see it is a cheap price. There’s been a bit of an improvement in risk appetite and gold can benefit on the back of portfolio flows.”
The article also notes that holdings of the SPDR Gold Shares Trust (GLD) dropped by 6.08 tonnes to 1,308.13 tonnes.

A Wall Street Journal report said buying interest picked up but is still soft.
TheBullionDesk analyst James Moore said: "The fact gold also rallied yesterday while SPDR ETF holdings declined is encouraging, but with risk appetite improving as European debt fears improve, gold overshadowed by top heavy technical outlook and limited physical demand the current consolidation phase may have further to run."
An earlier Reuters report ascribed the pre-jump lassitude to a shift away from risk aversion and concern over the drop in GLD's assets.
Technical analysts, who study charts of past price moves to determine the future direction of trade, said current signals pointed to near-term stability.

"Trendline support from 2008 is closing in near $1,173, and against here, we are looking for a bounce," said Barclays Capital in a note.

"However, to suggest a stronger base, we prefer to see a meaningful recovery through trendline resistance at $1,207."

With no news on the U.S. economy today, gold was left without any influencer from that region. It softened again, dropping from $1,195. As of 8:57, the metal was at $1,193.60 for a gain of $1.40 on the day. The Kitco Gold Index assigned +$4.05's worth of change to predominant buying and -$2.65's worth to greenback strength. The U.S. Dollar Index continued fluctuating at just below 83; as of 9:00, it was at 82.95.

Although gold got a good push in the London market, there still isn't that much excitement. Bernanke's testimaony today may supply some.

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