Gold Sidles Upward In Early Morning

There was little fluctuation in gold last night as the metal hovered around $1,185, but movements in the U.S. dollar were to provide some action. An early morning dip, starting at 1:30 AM ET, saw the price go down to as low as $1,180.40 in the next hour. Then, the metal reversed course. A rally, which continued until just before 7:00, briefly topped $1,190.60 at its height. A subsequent pullback left the metal still above $1,185. During this phase, the pre-results from Greek bank stress tests were released: all were expected to pass except for ATEBank, whose difficulties are already well-known.

As of 8:09 AM, the spot price was $1,187.40 for a gain of $1.30 on the day. The Kitco Gold Index attributed -$6.50 to predominant selling and +$7.80 to weakening of the greenback.

The U.S. Dollar Index weakened through the entire overnight session except for secondary reactions. Drifting downwards until 1:40, the Index ramped up from 83.1 to 83.3 in the next fory minutes. A double top at the latter level was the cue for it to begin a sustained decline that took it all the way down to 82.625 before abating at 6:50. As the times indicate, gold played off against the greenback this session. After double bottoming, the Index managed to get above 82.75 after 8:00. As of 8:16, it was at 82.79.

A Bloomberg article, as webbed by Business Week, says gold may advance on hopes for more safe-haven buying.

“We see support coming from the potential that safe haven is demanded,” Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago, said today in a report. “Markets aren’t content to sit back and watch the Fed do nothing more. This should be bearish for risk.”

“Gold had a big run last month as the European debt crisis drove a flight to safety, so it has been consolidating those gains in the past few weeks,” said Liu Mingliang, a Sichuan- based analyst at Chengdu Brilliant Futures Co. “There’s little conviction to either buy or sell gold at the moment, so the market will take its direction from other markets.”

The article also mentions the holdings of the SPDR Gold Shares Trust were unchanged yesterday.

A Reuters report, as webbed by NineMSN, said gold eased as investors wait for the results of the stress test.

"On the gold market, as a lot of the bids back in June were primarily on the back of worries about the banking crisis in Europe, so there has been a lot of noise about the stress tests," said Saxo Bank senior manager Ole Hansen.

"It seems most banks are going to pass, and that is removing some of the safe-haven support we've seen previously."

A retreat in concerns over the health of the European financial sector has allowed prices to slide back from the record highs at $1,264.90 an ounce they hit in June. An attempted move back up to $1,200 was short-lived on Wednesday.

"The way we got rejected yesterday at $1,200 indicates that there are sellers out there who are looking for an opportunity to reduce exposure," said Hansen.

Also quoted is James Steel, who said Ben Bernanke's comments yesterday afternoon indicated heightened deflation risk.

Initial U.S. jobless claims rose by 37,000 to 464,000 for the week ending July 17th, a number that was well above expectations for 450,000. The gold market didn't react all that much to the number, which came near the end of a drop from $1,188 to almost $1,185 when regular trading began. A slight recovery got the metal around $1,186. As of 8:54 AM, the spot price was $1,186.20 for a miniscule gain of $0.10. The Kitco Gold Index assigned -$7.80's worth of change to predominant selling and +$7.90's worth to greenback weakness. The U.S. Dollar Index lost momentum, sinking below 82.75 although the jobless-claims number provided a temporary boost. As of 8:58, the Index was at 82.72.

So far, the overall flatness in the gold market has continued. The metal may go for a bit of a run today, but the opening of the pit session wasn't all that encouraging. Gold's still stuck in the bargain zone.