Gold Drifts In Overnight Trading

Gold stayed between $1,210 and $1,215 in largely directionless trading until just before the regular-trading session began. Despite the recent Moody's downgrade, the Portugese government sold more notes due in 2012 and 2019 than expected. Both rates were significantly higher than the last offering of same-maturity notes. Eurozone inflation slowed down from 1.6% to 1.4%. Despite the latter item, gold didn't move in early-morning trading after getting a slight boost before London trading opened. Its peak at that time was $1,215.80. The second part of a double top at about the time London trading opened presaged a mild pullback that still left the metal above the middle of the range, which held until just before 8:00 AM ET. As of 8:11, the spot price was $1,208.10 for a loss of $3.20 on the day. The Kitco Gold Index split the loss into -$1.70 for predominant selling and -$1.50 for strengthening of the greenback.

The U.S. Dollar Index recovered slightly from yesterday's close, but stayed in a range all though the overnight session with little direction except sideways. A slight upward bias from night to early morning changed into a more neutral bias around 3:20. As of 8:17, the Index was at 83.59.

A Wall Street Journal report, written before the dip, notes gold has stayed up despite the euro softening against the greenback.

Gold managed to hold on to Tuesday's gains, indicating Tuesday's rally may have staying power. "It's bullish that it's stayed up here," said an analyst in London....

While the market initially ascribed gold's rise to the downgrade, the more likely factor was the euro, since it rallied at the same time, said the London-based analyst.

The euro's strength suggests the market is re-rating the euro-zone's growth outlook against the U.S.'s, he said. If that is the case, the euro and gold now may reprise the positive correlation they had until last November.

Also quoted was James Moore of TheBullionDesk.com, who said gold could test resistance at $1,245 if $1,219 was broken through on the upside.

A Reuters report ascribes gold's modest rise early this morning to continued worries over Euroland sovereign debt, but the capping of it to increased risk appetite.

"Every single time gold pulls back a new floor is established and that is always higher than the previous one," a Europe-based trader said. "I would say $1,200 an ounce is the key level; if it goes below that we would see dip buying." "But we think the direction is up going forward," he added.

A Bloomberg report said that gold's rises were muffled by improving economic news.

Improving economic data and news “limits gold prices to trade higher,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Above $1,200 an ounce physical buyers are not attracted. Gold is certainly in a consolidation phase.”...

“Clearly, safe-haven demand for gold is withering as evidence of an economic rebound emerges,” said Park Jong Beom, Seoul-based senior trader with Tongyang Futures Co. “Still, gold is likely to be supported above $1,200 level due to the dollar’s weakness.”

The article also notes holdings of the SPDR Gold Shares Trust were unchanged yesterday, while ten gold ETFs collectively added 1.1 tonnes to their holdings.

The retail-sales numbers for the U.S. economy showed an overall decline of 0.5% for June, making for the second monthly decline in a row. The news didn't have that much effect on gold, which moved directionlessly between $1,206 and $1,209. As of 8:52 AM, the spot price was $1,208.30 for a drop of $3.00 on the day. The Kitco Gold Index attributed -$3.20 to predominant selling and +$0.20 to greenback weakness. The U.S. Dollar Index did sink a little, but managed to stay above 83.5 for the most part. As of 8:56, it was at 83.52.

There has been a pullback by gold, but it hasn't been much of one. The metal is still well above $1,200, and there's a good chance it'll stay above that level in today's regular trading.