Thursday, August 5, 2010

Gold Drifts Around $1,195

There wasn't much action on the gold market overnight; the metal drifted around $1,195 for the entire session. Both the Bank of England and the European Central Bank left their respective rates unchanged, the former at 0.5% and the latter at 1%. Both announcements didn't change gold all that much, although the metal was creeping up earlier. As of 8:06 AM ET, though, the metal perked up to make the spot price reach $1,197.30 for a gain of $2.10 on the day. The Kitco Gold Index attributed -$0.80 to predominant selling and +$2.90 to weakening of the greenback.

The U.S. Dollar Index basically stayed where it was last night, hovering just below 81. A break above that level around 2:30 AM prefaced a peak above 81.1, which reversed at 3:25. The resultant slide took it down to 80.6 before a relief rally kicked in starting at 7:10. As of 8:13, the Index was at 80.79.

A Bloomberg report says gold stalled because of concern that the rally has engendered less physical buying.
“We are seeing resurgent interest from the investor community,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. Still, “interest from Asian buyers is likely to ease in the very short term, as prices have significantly recovered from July’s lows.”...

“Gold may take a breather before continuing on its longer- term trend, underpinned by strong demand from India and China,” said Ong Yi Ling, an analyst with Phillip Futures Pte.
The article also mentions holdings of the SPDR Gold Shares Trust declined by 0.45 tonnes yesterday to 1,281.83 tonnes.

A Reuters report says gold was held up by fund buying and Asian consumer demand.
Much of gold's safe haven appeal for investors that derived from the euro zone debt crisis and pushed prices to record highs in late June has evaporated.

But James Moore, an analyst with said renewed confidence in the global economy, helped by upbeat corporate earnings, has lifted the broader commodity complex as well as gold itself by association.

"While we have seen a bit of improvement in the European debt situation, I think investors are still very cautious and obviously, more and more people are looking to diversify their portfolios. So, even if they only add a fraction of gold, those numbers add up," Moore said.
The article also cites Edel Tully as noting the 30-day correlation between gold and the greenback has turned negative.

A Wall Street Journal report says gold is holding steady because of uncertainty over U.S. jobs data.
Better-than-expected jobs data Friday could rejuvenate investors' appetite for growth assets and dim demand for safe havens like gold.

"We have to wait for the payroll figures," said Narayan Gopalakrishnan, a trader at Swiss trading house MKS Finance in Geneva. "Overall it's range trading [until then]."

A return to the lows of July, however, is unlikely, analysts said. Physical demand from the jewelry sector has been solid, providing a floor for prices.

The weekly U.S. jobless-claims number was released at 8:30; it showed a rise in first-time claims to 479,000 when a fall to 453,000 was expected. Regular trading opened with a rise in gold, which continued when the figure was released. Despite the hype over the figure, gold didn't make $1,200 afterwards. As of 8:52 AM, the spot price was $1,199.60 for a gain of $4.00 on the day. The Kitco Gold Index assigned -$1.60's worth of change to predominant selling and +$5.60's worth to greenback weakness. The U.S. Dollar Index reacted to the release with a slump to below 80.55 before another relief rally set in. As of 8:55, it was at 80.63.

So far, gold is on track for a seventh daily gain albeit a slight one. $1,200 remains intractable, although the metal is still veering up against it. A more sustained test of that level may be in the offing today.

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