Gold Climbs, Hovers Below $1,215

Gold is still below the $1,219 resistance level of its current range, but is again inching towards the top of the range. The metal climbed above $1,210 last night, and settled in to the middle of the $1,210-$1,215 area. That sub-range, the metal stayed in this morning except for a time when it sunk slightly below the lower end for one and a quarter hours starting at 2:30 AM ET. In that timeframe, it made its daily low of $1,208.70. Rebounding, it moved closer to $1,215 and even exceeded it for a time; the daily high of $1,216.30 was made a little before 7:00. Pulling back later, it entered the middle of the overnight sub-range. As of 8:04 AM ET, the spot price was $1,213.50 for a gain of $5.00 on the day. The Kitco Gold Index attributed -$1.40 to predominant selling and +$6.40 to a weakening greenback.

As indicated by the Kitco Gold Index, the U.S. Dollar Index kept sinking overnight. After rallying a little late last evening, the Index fell down to 83.245 between 10:00 and 10:30. An early-morning recovery, starting at 1:45, got the Index back up above 83.4 but that recovery turned into a tumble starting at 3:30. Gold started rallying at that time. Falling below 83, the Index marked time after the decline finished around 6:25. As of 8:10, it was at 82.89.

A Bloomberg report, as webbed by Business Week, said slowing growth in the U.S. and the PRC along with a falling greenback boosted gold.

“The safe-haven part for demand is important and will be the most important thing to watch in the next few weeks,” said Dan Smith, an analyst at Standard Chartered Plc in London. “Gold seems to be reverting back to its relationship with the dollar. There is also an argument that the selloff in gold from its high was overdone.”...

China’s economic growth slowed to 10.3 percent after the government succeeded in tempering credit expansion, investment spending and property speculation. That compares with an 11.9 percent gain in January-March from a year earlier. Inflation cooled to 2.9 percent in June, and industrial output rose a less-than-estimated 13.7 percent....

Also mentioned in the article was the holdings of the SPDR Gold Shares Trust; they remained unchanged yesterday.

A Reuters report highlighted the same causes as the Bloomberg article.

"The market is broadly consolidating, the inverse gold-dollar relationship may be coming back into play," said William Adams, analyst at BaseMetals.com

"The China data was generally weak so there may be money coming back into gold as safe haven but the main thing is the dollar is generally heading lower."

The article also notes mainland Chinese inflation eased as did growth, which should forestall any further tightening measures by the People's Bank of China.

A Wall Street Journal report ascribed gold's rise to it following in the Euro's wake.

Analysts said gold appears to have built a base above $1,180 per ounce and has become more correlated with risk appetite, a reversal of the trend in May and June. Gold has risen in tandem with the euro, equities and commodities in recent sessions.

"As gold slowly and quietly—and perhaps only temporarily—aligns itself to risk indicators, the metal is also losing some of its positive correlation with the dollar, perhaps as an early stage of a revival of the traditional inverse relationship between the two," UBS analyst Edel Tully said in a report Thursday.

June's core PPI came in at a 0.1% increase, but the raw PPI fell by 0.5%. Food prices plunged, making for a much larger drop in the raw rate than expected. Weekly jobless claims fell to 429,000, well below expectations for 445,000. After falling on the news, to below $1,210, gold reversed course and ramped up above $1,216 as the greenback kept falling. As of 8:55, the spot price was $1,216.70 for a gain of $8.20 on the day. The Kitco Gold Index assigned -$1.50's worth of change to predominant selling and +$9.70's worth to greenback weakness. The U.S. Dollar Index continued to fall; the data releases hardly affected it. As of 8:57, the Index was at 82.72.

A weaker greenback has turned into a driver for gold, but one that's not piacking enough power to get the metal above $1,219. The metal may make a try for it in today's pit session.