Monday, July 19, 2010

Gold Gets Down Below $1,190

This week's trading began with lassitude; gold stayed stuck around $1,192.50 all through Sunday night (ET). As night turned into morning, the metal began to drift downwards. Touching $1,190 around 3 AM, the metal rallied but couldn't make $1,195. That rally failing, gold moved down to $1,190; after a relief pullup, it descended below that level. Moody's downgrading Irish sovereign debt by one notch from Aa1 to Aa2 didn't help the metal any. As of 8:05 AM, the spot price was $1,187.20 for a drop of $5.80 on the day. The Kitco Gold Index attributed -$6.80 to predominant selling and +$1.00 to weakening of the greenback.

The U.S. Dollar Index drifted upwards a little last night, but didn't make it above 82.75. A spike-up to a little above that level failed to carry through, and the Index sunk well below 82.50 before stabilizing at slightly below that level; it laster crept slightly above. As of 8:09 AM, the Index was at 82.52.

A Bloomberg report, as webbed by Business Week, says gold has been under pressure because speculators are reducing long positions.
“Price direction is probably down for this week and gold will spend more time around the $1,180 and $1,190 levels,” said Robin Bhar, a metals analyst at Credit Agricole CIB in London. “Prices looked overbought and everybody was very long gold,” he said. A long position is typically a bet for rising prices....

{Still, s]ixteen of 24 traders, investors and analysts surveyed by Bloomberg, or 67 percent, said bullion will climb this week. Three forecast lower prices and five were neutral. Prices below $1,200 an ounce attract purchases particularly in Asia, Mark O’Byrne, executive director of GoldCore Ltd. in Dublin, said in a July 16 report.
The article also notes that holdings of the SPDR Gold Shares Trust were unchanged on Friday.

A Reuters article says gold has come under pressure because of a newfound deflation watch.
"It's now deflation worries people are looking at," a Europe-based trader said, adding the market was wary after cautionary U.S. Federal Reserve minutes released last week. "Plus the euro is not helping either," he added....

"On the downside, $1,165 an ounce is a key support level and I don't think it could go all the way down. There's good demand in the physical market," the trader said.

Fresh worries on the eurozone's debt problems on news that the IMF and European Union suspended a review of Hungary's funding programme at the weekend could boost bullion's safe-haven appeal.
The article also mentions Dennis Garman's reassessment of his long-held strategy of buying Euro-denominated gold becuase of the Euro's recent strength.

A Wall Street Journal article says gold is still range-bound as it waits for direction.
Analysts said market participants are cautious, uncertain about the yellow metal's next move. They said gold will likely take its cues from new economic figures and the European bank stress tests results, out Friday....

The market should see trading volumes, which have already begun declining marginally, slip in the coming weeks as the "summer lull" takes full effect, analyst James Moore said.
The article also excerpts a Barclays Caital note that said gold's failure to break above $1,219 indicates greater downside than previously thought, although the firm expects the current short-term multiday range to continue.

Regular trading saw gold sink a little after a relief rally that took it up above $1,188. The drop took place right at 8:30 despite there being no news to push it down. After getting as low as $1,182.70, the metal rebounded to $1,185. As of 8:53 AM ET, the spot price was $1,185.80 for a loss of $7.20. The Kitco Gold Index split the loss into -$6.35 for predominant selling and -$0.85 for greenback strength. The U.S. Dollar Index, after making it above 82.5, continued on a run that carried it up to 84.64 before tailing back As of 8:55, it was at 82.58.

The summer doldrums are back. It remains to be seen how much of a cushion physical buying will provide. Gold isn't likely to see $1,200 today, but it's still near the bottom of its multiday short-term range.

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