Gold Drifts In Overnight Session, Jumps In Early Morning

Overnight trading wasn't that exciting, as gold stayed in a range bordered by $1,195 and $1,200. Although dipping below the former number around 9:00 PM ET, the metal quickly recovered to move back in the range. Another downward test took place around 5:30 AM, making for a daily low of $1,194.20. Again, the range was restored. Just before regular trading opened, gold was still below $1,200.

That changed when the pit session was about to open. A slow rise that started within the range around 6:00 accelerated, breaking $1,200 just before 8:15. Regular trading began with gold on the way to making $1,204. After hovering around that level, the metal jumped up above $1,210 in short order starting at 9:00. Although sliding back, it bottomed above $1,206 and kept most of the day's gains. There was no immediate news item to explain the leap. The U.S. Dollar itself leapt up a little before gold did.

After the post-jump pullback, the metal resumed its rise, slicing through $1,210 easily. As of 10:24 AM ET, the spot price was $1,212.40 for a gain of $14.70 on the day. The Kitco Gold Index attributed +$16.70 to predominant buying and -$2.00 to strengthening of the greenback.

The U.S. Dollar Index also drifted around in the overnight session. Stuck around 83.85 last night, it took a dive starting at 2 AM; the subsequent decline took it to just above 83.6. Reversing, it then forded up to 83.9 before pulling back yet again. Starting at 8:00, the Index then took off to break 84; it topped out its run at 84.1 forty minutes later. At this time, gold had jumped up to $1,204 and was stuck there. Pulling back, it sunk a little below 84. As of 10:31 AM, it was at 83.91.

A Wall Street Journal report said that gold was resting before shooting up.

"Gold is reaching for stability," said Sterling Smith, market analyst at Country Hedging in Inver Grove Heights, Minn. "We are consolidating around $1,200."

The euro, often seen as a higher-risk currency than the U.S. dollar, is moving lower amid concerns over Japanese elections and euro zone debt. S&P 500-stock index futures are lower [at the time of the initial surge-up.]

Also cited is another analyst who said the rise was due to traders getting back into positions they had sold.

An earlier Reuters report, webbed at about the time today's rally started, said that bargain hunting was beginning to euchre out speculative selling.

"We see a lot of people buying gold on dips, below $1,200. However, what we see in these past few days is a bit of indecision in the market," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

"In the long run, I don't think that the economic recovery is still entrenched yet. People are still waiting for more signs that the economic recovery is really on track."

Also mentioned in the report is the SPDR Gold Shares Trust's holdings slipping by 0.44 tonnes to 1,316.04 tonnes.

The second leg of the morning rally topped out at $1,214.80. Although an unexpected decline in wholesale inventories was listed as a cause, the number was released more than fifteen minutes prior to the second leg. After settling back to above $1,212, the metal continued to dip; $1,210 fell too. As of 10:46 AM, the spot price was $1,209.00 for a gain of $10.50 on the day. The Kitco Gold Index assigned +$10.50's worth of change to predominant buying and -$2.20's worth to greenback strength. The U.S. Dollar Index churned, failing to make it back above 84; as of 10:48, it was at 83.92.

The overnight session wasn't that great, but it wasn't that bad either. More to the point, the last couple of hours saw a base being built that foreshadowed a decisive break above $1,200 just before regular trading started. The dry spell has come to an end, making those who said that the previous doldrums represented a buying opportunity look fairly good.

Myself, I slipped up in the time department. The reason for this report covering a later period is because I got to the computer late. Thanks for your patience.