Gold Holds Steady

It was a quiet overnight, with gold drifting downwards in the night part and drifting back up in the morning. Although Moody's threatened to cut the rating of Spanish sovereign debt, an auction of five-year bonds still went through. The bid-to-cover ratio was lower than usual, and the rate was 12.5 basis points higher than the last one, but the auction was enough of a succes to help the Euro. Despite the Nikkei being in the doldrums, business confidence in Japan hit a two-year high with manufacturers becoming upbeat about business prospects.

The metal drifted down to a little below $1,240 by midnight, and hovered around there until 3:30 AM ET. At that point, it turned up in a slow two-stage advance that got all the way up to $1,245.10 before tailing off. As of 8:04 AM ET, the spot price was $1,241.40 for a drop of $1.00 on the day. The Kitco Gold Index attributed -$8.90 to predominant selling and +$7.90 to a weakening greenback.

The U.S. Dollar Index, after rallying slightly at night, took a tumble largely on the news of that relatively successful auction of Spanish sovereign debt. Reaching almost 86.25 just before 10 PM, the Index fluctuated between there and 86.05 until the decline started at 2:45. Lasting more than five and a half hours, the drop took the Index down below 85.5. As of 8:15 AM, subsequent to a pull-up, it was at 85.53.

A Bloomberg report says that gold is little changed, but may advance.

“Given the current concerns over inflation, slowing economic recovery and European debt the metal may look to extend higher as investors continue to diversify from fiat currencies,” said James Moore, an analyst at TheBullionDesk.com in London....

“For the time being, gold looks likely to remain in demand as a safe haven,” Eugen Weinberg, head of commodity research at Commerzbank AG, wrote in a report yesterday. Still, that trend may be countered by weak seasonal demand for gold from India, the largest importer, Weinberg said.

The article further notes that Indian purchases are expected to fall by as much as 36% this year.
A Reuters report ascribes gold's steadiness to support from safe-haven buying motivated by concerns about global growth.

"It is not unusual for gold to trade in this way, with a period of consolidation after a healthy price rise," said Michael Widmer, an analyst at Bank of America-Merrill Lynch.

Investors are awaiting key U.S. payrolls data on Friday for clues as to the next direction of trade, he said.

"The labor market report is quite critical because a lot of the recent consumer confidence drop came about because people are concerned about their employment prospects," he said.

"If you do get a slowdown, the picture for some of the cyclical asset classes may be perceived to be not as strong... and that could be quite positive for gold overall."

Also mentioned was a new record in another currency: the Canadian dollar. That record was made on the eve of Canada Day, which is today.

A Wall Street Journal report said gold was steady in the absence of a catalyst.

"The bullion is still stuck in a fairly narrow range, bouncing off our key support at $1,230 a troy ounce in thin trading," VTB Capital analyst Andrey Kryuchenkov said. "Risk-aversion is still evident, but there have been some positive developments limiting the downside in commodities and the upside in gold."

He noted that volume remains low. "I think people are just waiting for some clear direction," he said.

That same point was echoed by another quoted analyst.

Weekly first-time U.S. jobless claims unexpectedly rose to 472,000. The news helped drive down gold to the $1,236 level from the $1,241 it was at just before the release of the number. Bottoming around 8:40, the metal pulled back up but couldn't stay above $1,240. As of 8:54 AM, the spot price was $1,239.20 for a loss of $3.20 on the day. The Kitco Gold Index assigned -$16.00's worth of change to predominant selling and +$12.80's worth to greenback weakness. The U.S. Dollar Index continued dropping, with the jobless-claim number not interfering. As of 8:57, it was at 85.15.

The metal continues to languish, as the slow season continues. There may be a continuation of yesterday's choppiness, but there's no sign of it yet.

As mentioned above, today is Canada Day. Happy day to those who celebrate it.