Gold Tops $1,210, Slides Back To $1,205

Thanks to an encouraging (for the gold market) employment report that showed private-sector payrolls growth well below expectations, gold shot up to $1,208 by 9 AM ET and briefly touched $1,210. There was a pullback, but it wasn't that great in extent; the drop ended at $1,206. Then, gold continued to rise but in a laboured fashion. Poking above $1,210 twice before the laboured rally ended, when the metal touched $1,212.20, it fell back to a little above $1,206. A third attempt at $1,210 resulted in another poke-above that failed to hold. As of 11:56 AM, the spot price was $1,207.10 for a gain of $12.20 on the day. The Kitco Gold Index split the gain into +$5.35 for predominant buying and +$6.85 for a weakening greenback.

What got gold gaining, got the U.S. Dollar Index tumbling. From around 80.85, the Index descended to below 80.1 before the decline halted as of 10:07. From there, it recovered with a slow and rolling advance that still left it well below 80.5. As of 11:58, it was at 80.35.

Needless to say, $1,200 has been smashed. The reaction to what was really a mixed report - the unemployment rate of 9.5% was slightly below expectations - shows pent-up demand for the metal that was waiting for a catalyst. Gold may fall back later, as has often been the case after recent morning leaps, but a close above $1,200 seems assured.


Update: Gold did break through $1,206 on the downside, making for an afternoon post-leap pullback. After doing so, the metal stayed between $1,204 and that price until a little before the end of the pit session. As of the end, or 1:30 PM ET, the spot price was $1,203.40 for a gain of $8.10 on the day. The Kitco Gold Index divided the gain into +$2.15 for predominant buying and +$6.35 for greenback weakness.

The U.S. Dollar Index kept climbing in early afternoon, but slowly. Before pulling back, it barely climbed above 80.4. As of 1:30, the Index was at 80.34.

Despite the letdown gold is still well above $1,200 - and it's still likely to close above that number, making for another third-time-lucky test.


Update 2: Gold did close above $1,200; in fact, it closed above $1,205. The dip below that level at the end of the pit session continued for a short time afterwards, but then reversed with gold climbing back up to $1,206 by 2 PM ET. The rest of the electronic-trading hitch was quiet, with the metal fluctuating a little above $1,205 except for a brief reversed dip. As of the close, the spot price was $1,205.70 for a gain of $10.80 on the day. The Kitco Gold Index apportioned the overall gain into +$4.90 for the predominant-buying category and +$5.90 for the weakening-greenback one.

This week saw a reversal of the declines that previous weeks ended up displaying. Last Friday's close was at $1,181.40, so this week saw a substantial gain of $24.30 or 2.06%. The close for this week was also well above that of two weeks ago.

The U.S. Dollar Index, after managing to get up to 80.425 at 1:15, stayed between that level and 80.295 for the rest of the session except for the last five minutes. A jump above the high didn't stick, though, and the Index closed the week at 80.39.

Its daily chart, from Stockcharts.com, shows the recent attempt at basing thwarted:



Again, what I thought would be the beginning of a short-term turnaround wasn't. The Index managed to stay above the 80 support level, but its reaction to this morning's jobs report shows bearish sentiment has not been exhausted. The Index's RSI level, found at the top of its chart, is still in oversold territory.

It's gone so low, a pattern is beginning to show up - one that does not bode well for it. The Index is very close to touching the same level it was at on April 14th and 15th, before the Eurocrisis-fueled rally got rolling. All but a smidgen of the rise subsequent to those mid-April days, right up to above 88.5, has now been erased. The Index started a late March rise, which took it up to above 82.25, at a little above 79. The descent to 80 comes close to making a head of a months-long head and shoulders reversal. There isn't really a neckline, but more of a neck zone between 79 and 80. The Index only has to fall a little further before entering that zone - and it may.

All it would take to complete that pattern would be a future rise to well below 88 and a fall below 79. Since the pattern's been long in developing, it would take some time to see whether it will go to completion.

Turning to gold, its own daily chart shows its breakthrough above $1,200:



The crossover of gold's MACD lines, found at the bottom of its chart, had the say. Two days after switching to a bullish configuration, the metal has advanced beyond an important resistance level after two days of trying. The third time was the charm.

The metal's RSI level is comfortably above the 50 neutral level, a zone at which it's not been at since the end of June when it was around $1,240. The inverse head and shoulders bottom I was expecting didn't come to pass because gold continued rallying above what would have been the neckline of it. Technically, gold is looking pretty good.

Certainly, it looks better than it did as of last Tuesday's close. Then was the cut-off for this week's Commitment of Traders data, as graphed here. At that time, though, gold had finished the fifth day of its six-day rally; so, the technicals looked fairly good then. As of that time, total open interest had shrunk for the fifth week in a row. All reportable categories shrunk, including the well-watched commercial shorts category. The category that shrunk the most in percentage terms was commercial longs, which decreased by 7.00%. The least, non-commercial longs by 2.43%. Interestingly, long was the place to be for the rest of the week; the latter category, as a category, showed the least disconnect from what transpired later in the week.

As for the U.S. Dollar Index's own CoT data, graphed here, its total open interest remained low but managed to barely break the recent losing streak. Commercial longs nearly doubled from their recent sliver. The only other category to increase was non-commercial shorts, by 28.9%. The other two categories declined. Given the Index's brief rebound the following day was more than checked by two subsequent down days, the non-commercial shorts had it.

A post-pit Reuters report says gold was up on safe-haven demand triggered by the disappointing nonfarm payrolls component of the jobs report. Amongst the points therein, these were included:

* Gold accelerated gains and Wall Street sank after government data showed U.S. private employers added fewer workers to their payrolls in July than expected.

* Recent weak economic data suggested interest rate will be low for a while, which is very good for the precious metals relative to other assets - Thomas Winmill, portfolio manager of Midas Fund MIDSX.O.

* The usual inverse relationship between gold and the dollar has shown signs of a resurgence, after the link loosened earlier this year as extreme risk aversion benefited both assets - analysts.

Gold definitely has had the better of the now-inverse corrlation lately. If things go well, the metal will stay above $1,200 next week and build a base at the new higher level. It's past the bargain-hunting zone, but new demand is beginning to show up. August is starting to shape up as the month when gold shakes off those summer doldrums.

In closing, thanks for stopping by and reading what I've posted here. May your weekend be unmuggy.

Nottingham Scientists Find Way to Use Gold As Antiseptic Agent

A team of scientists at Nottingham Trent University has found a way of binding gold nanoparticles to antibiotics. The gold lessens bacteria resistance to the antibiotics by weakening the cell walls of the creatures.

The tests so far have been extremely positive and indicate that the particles are highly potent at neutralising bacteria such as E Coli.

The findings of the tests have been published in the Journal of Materials Chemistry and detail how the team has been able to control the production of nanoparticles as part of a chemical reaction. The tests have proven that the particles are highly robust and effective in both acidic and alkaline environments alike.

The gold within the nanaoparticles creates holes in the cell walls of the bacteria which reduces their resistance to antibiotics. The ability to coat particles with antibiotics could lead to exciting and innovative new ways of looking at how we fight bacteria over the coming years....

Boffo for the boffins. They and gold will save lives.

Australian Fitness Club Rapped For "Gold Coin To Join"

The reason given for the Australian Competition and Consumer Commission launching a complaint about Fitness First's "Gold Coin To Join" campaign was the exclusion of an additional administration fee, but there may be cause to wonder if the campaign was frowned upon because Fitness First didn't quote a legal-tender price.


It's a straw in the wind, of a certain sort. Using gold as a medium of exchange, despite E-gold launching long before PayPal, never really took off. If it does, there may be similar hostility surfacing along with it.

John Paulson's Gold Fund In A Bit Of A Spot

Most of John Pauson's funds would up with gains in July, but his gold funds were a notable exception.

Paulson's gold-oriented fund, the New York-based fund firm's newest offering which launched this year, tumbled 5.93 percent in July, but is still up 5.7 percent [on] the year.

Paulson might get some bad press for that July result, but his gold fund has actually done better year-to-date than his flagship Advantage fund. Despite the hoopla that accompanied its launch, he didn't get much money subscribed to it apart from his own. Paulson himself put $250 million of his own funds in the project, which resonated with the comparisons to his bet against subprime mortgages in '07.

Gold Stays Steady In 1190s

There was some fluctuation in gold during the overnight session, but the overall direction was sideways; roughly, the metal centered around $1,195. Signs of a slowdown in Euroland emerged with U.K. factory output rising by a less-than-expected 0.3% and German industrial production unexpectedly falling by 0.6% in June. Gold initially fell last night, bottoning below $1,193 a little after 8:00 PM ET, but then rose. Peaking at $1,199.60 as of 4 AM, the metal slid down once again to bottom at $1,192.50 more than two hours later. Turning around, its subsequent rise was muted but enough to carry the metal above $1,194. As of 8:02 AM, the spot price was $1,195.00 for a gain of $0.10 on the day. The Kitco Gold Index attributed +$1.30 to predominant buying and -$1.20 to strengthening of the greenback.

The U.S. Dollar Index stayed mostly flat last night, but rose starting at 3:40 AM after a slight fall to 80.7. Reaching almost 80.95, the Index double-topped and then pulled back a bit. As of 8:08, it was at 80.87.

A Wall Street Journal article says gold has remained flat on low volume due to anticipation of an especially good or bad unemployment number.

"There is a lack of liquidity and everyone is just waiting to see how the data looks," a trader said. "A strong number either way could really move the market."

Expectations of more robust data, following some increasingly positive figures out of the U.S., have been reduced somewhat after Thursday's disappointing U.S. jobless claims data, SEB analyst Bjarne Schieldrop said.

Generally, the weaker the numbers the better for gold. Although not mentioned in the report, holdings of the SPDR Gold Shares Trust increased 0.92 tonnes yesterday to 1,282.75 tonnes.

The U.S. jobs number came out, and the unemployment rate shows a slightly better picture than was expected; the overall picture was mixed. July's rate of 9.5% was slightly better than expectations for 9.6%, but private nonfarm payrolls expanded by 71,000; expectations were gfor a gain of 100,000. The total number of jobs lost was 131,000. The gold market took off on the news. Starting at $1,196, the metal shot up above $1,200 to reach $1,208 before stalling. As of 9:02 AM the spot price was $1,207.40 for a gain of $12.50 on the day. The Kitco Gold Index split the gain into +$6.30 due to predominant buying and +$6.20 due to weakening of the greenback. The U.S. Dollar Index, as indicated, reacted badly to the news. From about 80.85, the Index fell all the way down to 80.35 before stalling. As of 9:05, it was at 80.38.

$1,200 has been tested, and gold has shot through. The gain's been strong enough to give a good chance for the metal closing above that level today.

Indian Gold Buying Muted For Second Day In A Row

According to a report by the Economic Times, Indian gold buying remained subdued again because of higher prices in U.S. terms amplified by a weakening rupee.

"There is nothing much today, even yesterday was equally bad," said a dealer with a state-run bullion dealing bank in Mumbai....

"Buying could be seen below $1,190 (an ounce)," said another dealer with a private bank.

Despite the dullness, some upwards price acclimatization is taking place. The trigger point mentioned by the second source used to be $1,180.

Inevitable End To Protest Against New Mine

In Canada, anyways. Ken Masse was the only holdout against Osisko Mining's offer to buy his family home in Malarctic, Quebec. His and 204 other homes were sitting on top of the deposit, so he fighting an expropriation order and refusing to sell his home to Osisko would have held up the development of the mine. Masse said he was fighting to protect the environment from the mine and for property rights - an interesting combination.

Now, he lost in court. Instead of a large premium, he and his mother will only get court-assessed market value for the home. It'll be a lot less than what Osisko offered in the past.


The little guy fighting for his property rights against a corporation that had to resort to expropriation - this story would resonate in many parts of America. In Canada, though, expropration has a tradition all its own. The United States has only recently joined in.

Yamana Gold Boosts Dividend Too

Yamana is the latest company to jack up its dividend, with a 100% increase from four cents per share per year to eight cents. As with the Newmont and Barrick, higher earnings made it possible. Kinross, most likely because of a takeover commitment, didn't increase its own.


It looks like the gold companies are getting the message about why so much investment demand has been sucked from their shares to the gold ETFs: paper gold is a purer play, with none of the complications that come with investing in a mining company. Since the corresponding opportunities that leverage offers doesn't seem to be a big draw, a dividend (which a gold ETF cannot pay) can act as an additional inducement.

A dividend boost is also a way to advertise higher earnings.

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 thebulliondesk.com 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.

Gold Pokes Above $1,200, Then Chokes

After being barely fazed by the ADP data report showing stronger job growth than expected, gold entered into a staggered rally that took it up above $1,200. The actual break came at about 8:50 AM ET, but it stuck until a pullback more than an hour later. The peak of the rally made for a new daily high of $1,204.20. The metal sunk to below $1,200 again on the heels of an ISM report saying the U.S. service sector in July expanded slightly but more than was expected. Again, the good news proved to be bad news for gold; the resultant pullback was a little more than a momentary interruption. Another rally, starting at 10:20, peaked at less than the first one but well above $1,200; a later pullback, though, left gold a little lower than that level. As of 11:58, the spot price was $1,198.90 for a gain of $13.30 on the day. The Kitco Gold Index attributed +$18.30 to predominant buying and -$5.00 to a strenthening greenback.

The U.S. Dollar Index did strengthen in mid-morning due to that ISM report after drawing a little strength from the ADP one. It got started just before 10:00, but got on a roll afterwards; the rally didn't stop until the Index brushed against 81.1. 81 didn't hold, but the Index descended to a level not far below; as of 11:59, it was at 80.97.

The rally in the greenback did dampen gold's increase, as the metal's high of the day was made before the Index's run. Given the resistance met at $1,200, gold closing above that level isn't very likely. Still, the gain has been fairly impressive. There might be another test of $1,200 in the rest of the pit session.


Update: There was, but the test led to a downturn that took the metal below $1,195. Starting around 1:00 PM ET, it descended from right around $1,200 all the way down to $1,194. No news accompanied that breakdown, which seems to be the result of the earlier greenback rally. As of the end of the pit session, or 1:30 PM, the spot price was $1,193.70 for a gain of $8.10 on the day. The Kitco Gold Index assigned +$14.80's worth of change to predominant buying and -$6.70's worth to greenback strength.

The U.S. Dollar Index, after hovering around 80.95, managed to climb back above 81 just after 1:00. Although not making it to 81.1, it came close. As of 1:35, the Index was at 81.03.

The spill in the last half hour of the pit session put an end to any hope for gold closing above $1,200. Still, a gain of the day seems assured and there's still an outside change of the metal closing with a double-digit gain.


Update 2: That outside chance was made, thanks to a rebound near the end of the day, but just barely. The rebound that did so was the second in today's electronic-trading hitch. The first kicked in right after the pit session ended, pulling the metal up to $1,196-97; it snuck above that zone as the rise continued. Came 3:15 PM ET, and the rise turned into a decline that took gold down to $1,193 by 4:00. The second rise ended with a last-minute kicker that put the closing figure at $1,195.60, for a gain of exactly $10.00 on the day. The Kitco Gold Index attributed +$15.30 to the predominant-buying category and -$5.30 to the strengthening-greenback one. Those two categories sum up to the raw change on the day.

The U.S. Dollar Index, after hovering around 81.1, slid down for more than an hour after 2 PM. Getting below 80.9, it stayed around that level before regaining most of the loss; despite that rebound, it failed to make 81 again. As of 5:30, the Index was at 80.935.

Its daily chart, from Stockcharts.com, shows the first up day in six:



Unlike the previous up day, this one wasn't that insubstantial. Today's close was at the same level as yesterday's open, so today's action reversed yesterday's. The Index's RSI level, found on the top of its chart, is still in sub-30 oversold position but less so than yesterday. As it turned out, touching the 200-day moving average yesterday did act as a kind of support (at least for now.)

It's been quite the downward slide, so some kind of rebound was inevitable. The last upturn only lasted a day; the one before last, four. That earlier one, starting July 19th, was good for a point and a half between bottom and top. I can't say how long this one will last, only that the low RSI level indicates the Index is due.

As for gold, its own rise today made for the sixth gain day in a row:



Its poke above $1,200 shows in the top of today's candlestick. Gold's own RSI level is slightly above neutral, a level that's associated with short-term tops ever since the beginning of July. Even if the metal pulls back from here, its current run has been large enough in extent to make for a head in an inverse head and shoulders reversal. With a neckline around $1,205, the pattern indicates a durable rise into the 1200s if completed. So, even if gold sinks back into the 1180s, the technical position isn't that bad anymore.

Moreover, the MACD lines at the bottom of the chart have shifted to a bullish configuration for the first time since June. This switchover does not guarantee the rally will continue tomorrow, but it does indicate that gold's doldrums have come to an end.

A post-pit Wall Street Journal report says an increase in mainland Chinese demand, plus speculation that the Fed will undertake more quantitative easing, pushed gold up today.

Gold was supported Wednesday by speculation that the Federal Reserve may lower interest rates or buy bonds to try to boost the economy, said Tom Pawlicki, precious-metals analyst with MF Global in Chicago. Even symbolic action by the Fed could send a signal that officials believe the economy is at risk of deflation or a renewed slowdown, enhancing the appeal of gold as an alternative asset....

Futures also received continued support Wednesday from the news that China would take steps to expand its domestic gold market. The People's Bank of China Tuesday announced that the government would permit more banks to export and import gold. Analysts say the easing of restrictions shouldn't immediately lead to an increase in gold investment, but it represents an expansion that could make China a larger player in the international gold market.

"I think the Chinese news is a longer-term underlying theme," said Adam Klopfenstein, senior market strategist with Chicago-based Lind-Waldock. "If they're going to get more aggressive in letting people buy and sell more gold, it's a precursor to more moves from the central bank" in the gold market.

The metal may pull back (further) tomorrow, but the extent of the rise so far has put it in a good position for the coming month. Another gain might as well be a bonus.

Peter Munk Sides With Peak Gold

The peak-gold case is being bolstered by none other than Peter Munk, the chairman of Barrick. Essentially, the case is based on the Law of Diminishing Returns and the fact that gold explorers are running out of world. According to Munk, it shows in the recent popularity of mixed-metal deposits - particularly, copper-gold. Dr. Jeffrey Lewis explains:

Mining companies would greatly prefer to dig for a single metal at a time. One metal in one area, with an acceptable ratio of content to dirt, is preferable. For example, should a company be able to pull out 5 grams of gold per ton of dirt, the mine will be wildly profitable. This type of ratio is good enough to develop consistent profits, and the companies can keep digging until every last piece is brought to the surface.

The problem is, however, that those types of mines are gone, and mixed metal operations are the last stop for sustained growth. Mixed metal mines are less profitable, thanks to the difficulty in sorting, as well as accounting for the potential profit and loss due to operations.

While there is still plenty of gold and silver to be found, the simple fact that these mixed metal mines are even on the radar indicates that the days of rampant production are over, and mines are being forced to look for smaller and smaller deposits of multiple types of metals to remain consistent in their growth rates. All in all, the supply of gold and silver in the ground is becoming freakishly low....

Peak gold is still controversial, as the world hasn't been exhausted yet. There are decent, and some huge, properties being found in unexplored areas of already well-combed areas like the Timmins district in Ontario, British Columbia and Alaska.

Indian Gold Buying Forestalled By Higher Prices

According to a report by the Economic Times, gold buying retreated because prices have passed above the bargain zone.

"On Monday we saw good sales, but by yesterday evening it turned dull... but today only exporters are covering fearing that prices may move higher," said a dealer with a state-run bank in Mumbai, which deals in bullion.

"However, there are no domestic deals...," said the dealer....

"They would buy if prices come to $1,180 (an ounce)," said another dealer with a private bank.

Also adding to the weakening demand was a weakening rupee.

Hedging Now A Dirty Word

A Wall Street Journal article covering the annual Diggers & Dealers forum in Kalgoorlie, Australia points to the current unpopularity of hedging. The reason behind the shunning is angry shareholders, who saw some earning slip away due to hedging earlier in the decade.

"Hedging is a four-letter word around here," said Darren Klinck, vice-president for investor relations at Oceanagold Corporation (OGC.AU), an unhedged gold producer that estimates it will produce more than 270,000 ounces in the fiscal year that began July 1 from its mines in New Zealand.

Klinck, who was attending the annual Diggers & Dealers mining forum in Western Australia's gold-mining capital Kalgoorlie, said major shareholders would not support the company if it was hedged, as their typical investment objective is leveraged exposure to the gold price.

Virtually all the small and mid-size miners at Diggers & Dealers gave the same message.

Another participant quoted, Sean Russo, said the aversion to hedging has become irrational.


The article itself intimates that the current anti-hedging tilt could be a contrary indicator. For the record, Barrick bought back its hedge book on the same day of gold's 2009 peak.

Gold Breaks Above $1,190

There was little accompanying news in this cycle, but gold managed to break above the barrier that's stymied it for the last two days. The metal bumped up against $1,190 for a two-hour stretch starting just after 7 PM ET. The breakthrough came around 9:00, and the metal ascended to $1,193-4. Falling back to slightly below $1,190 by 2 AM, the metal reversed course and rose to the $1,195 level and later beyond. As of 7:59 AM, the spot price was $1,196.40 for a gain of $11.40 on the day. The Kitco Gold Index split the gain into +$10.50 for predominant buying and +$0.90 for weakening of the greenback.

The U.S. Dollar Index actually rallied through most of the overnight session, but shed its gains in early morning. Although jaggedly, with an interrupting spill that erased all of its gains, the Index managed to climb up all the way to almost 80.8 by 4:35. The reversal was also jagged, with a sharp drop followed by a sharp recovery that took the Index back to 80.75, but was enough to take it well below 80.55 before reversing too. As of 8:11, the Index was at 80.59.

A Reuters report said gold rose as a result of the PRC's liberalization of the mainland Chinese gold market and a current damping of the appetite for riskier assets, and was held back by lack of safe-haven demand.

"The initial impetus of safe-haven buying of gold has faded away," said Standard Chartered analyst Daniel Smith. "We are slowly moving to other drivers."

"Ultimately we are going to see more portfolio money coming into gold," he added. "We could see consolidation in the short term, but ultimately on a one to three month view we are going higher."...

The gold market also continued to take support from news that China had taken steps to liberalize its gold trade.

"The international gold market is now paying a lot more attention to China's gold demand, not just from an official reserve asset perspective, but also private demand," UBS analyst Edel Tully wrote in a note.

"Behind India, China is the second-largest physical consumer," she added. "Therefore any step to integrate, liberalize, and expand this market should, in time, foster a rising appetite for gold."

The article also mentions another bullish factor: rising speculation that the Fed will undertake another quantitative-easing program.

A Wall Street Journal article also pointed to the PRC liberalization.

"China became the focus of the gold market and the potential for increased demand from this region prompted gold to trade to a high of $1,194 a troy ounce in Asia overnight," said UBS analyst Edel Tully.

Also mentioned is the results of a UBS tally of twelve gold ETFs, which showed a rise for the first time since July 27th.

The ADP jobs data noted a gain of 42,000 in July for the sixth consecutive monthly gain. Although the number was well above expectations for +23,000, the gains still show no acceleration. The news bobbled the gold market temporarily, chipping its price to $1,195, but the metal recovered afterwards. As of 8:49 AM, the spot price was $1,197.60 for a gain of $12.00 on the day. The Kitco Gold Index attributed +$13.10 to predominant buying and -$1.10 to a strengthening greenback. Unlike gold, which was little affected overall, the U.S. Dollar Index got a boost from the news. Initially rallying to 80.66, it pulled back to 80.6 but rose further before pulling back to a higher level. As of 8:52, it was at 80.67.

With gold well above $1,190, and even above $1,195, the level to watch for now is $1,200. The metal is unlikely to make it above that round number, but it's now close to a test. It may poke at $1,200 later today.

Gold Fluctuates In Mid-High 1180s In Morning, Tests $1,190

Regular trading opened with a drop that got the price down to $1,184, but bounced back shortly afterwards. The personal income and spending data for U.S. consumers had little effect on the price, which sunk to around $1,185 between 9:15 and 9:45 AM ET. Then, the metal rallied to a smidgen below $1,190. That rise didn't last, and gold sunk back down to the $1,185 level. U.S. factory orders data for June, which showed a drop of 1.2% for capital equipment, added to the downward pressure on equity markets as well as gold.

After bottoming around 10:40, the metal reversed course and rallied all the way up to a new daily high of $1,191.90. The pullback left the metal above $1,188, suggesting further strength. As of 11:54 AM, the spot price was $1,188.80 for a gain of $6.80 on the day. The Kitco Gold Index split the gain into +$3.00 for predominant buying and +$3.80 for greenback weakness.

The U.S. Dollar Index showed a bit of strength in early-mid morning, but couldn't get much above 80.8 before it turned down again. As of 11:57, it was stuck at 80.60.

Gold has tested $1,190 gain today, but so far has not seriously breached that level. It may do so this afternoon, but a continuation in the high 1180s looks more likely.


Update: After that break above $1,190, the metal did sink back into the high 1180s. At the nadir of the pullback, it was only a little above $1,185. It bounced back somewhat but stayed in the lower end of the upper 1180s. As of the end of the pit session, or 1:30, the spot price was $1,185.40 for a gain of $3.40 on the day. The Kitco Gold Index attributed -$0.40 to predominant selling and +$3.80 for greenback weakness.

The U.S. Dollar Index stayed largely where it was in early afternoon. A slight upwards bias didn't get it above 80.65. As of 1:30, it was 80.62.

So far, gold has stayed in the higher 1180s and shows no sign of advancing much from there. Although it may bend $1,185 to the downside, it will likely rack up a gain for the day.


Update 2: Gold did manage to close with a gain, and most of the volatility in the electronic-trading hitch was upwards before retracements. Gold got as high as $1,188 before falling back, and dipped as low as $1,185 after that peak. The subsequent recovery wasn't much in extent. As of the close, the spot price was $1,185.60 for a gain of $3.60 on the day. The Kitco Gold Index assigned -$0.80's worth of change to predominant selling and +$4.40's worth to a weakening greenback.

The U.S. Dollar Index's slight upwards bias faded in mid-afternoon, but the pullback wasn't that much in extent. Except for a brief period in late afternoon, the Index stayed above 80.55; after that brief period, it rebounded. As of 5:30, the Index was at 80.61.

Its daily chart, from Stockcharts.com, shows its latest decline continuing to a rather significant spot:



Significant to a technical analyst, anyway. The Index has touched its 200-day moving average, drawn in red in the middle of the graph. That average is way below the 50-day, drawn in blue, so the Index is still far away from a "death cross." Nevertheless, the distance is also testament to how far the deterioration has progressed. The Index's RSI level keeps getting deeper into oversold territory, with little effect on its declining as yet. Today's session marks the fifth down day in a row.

There's no indication that the current downtrend will reverse by any significant margin. The 200-day moving average is widely seen as a support level amongst techncial analysts, so some technical buying may be encouraged by today's descent - even if a plain chart reading shows a lot of risk in doing so. The Index can't fall forever, so eventually it'll reverse, but the last two short-term drops almost makes it look as if it could drop forever. As with yesterday's there's no sign of any upward reversal in the offing.

As for gold, its own daily chart shows the opposite streak:



Today's slight gain makes it the fifth up day in a row for the metal. Gold managed to get, and stay, above $1,180 today. That puts it back in the range it was in before July 27th's plummet.

Gold's own RSI value is close to the 50 neutral level at which that indicator has topped in the metal's summer doldrum stretch. Down below, at the bottom of its chart, gold's MACD lines are very close to a bullish crossover. Should gold hold above $1,180, it will be a good sign of some sort of recovery settling in.

A post-pit Reuters report says physical buying has helped gold's technical position improve.

Scott Meyers, senior analyst at New York-based Pioneer Futures Inc, said that gold's direction hinged on the stock
market's performance, as a possible equities sell-off could spark higher gold prices.

He said an improved technical picture should also lift prices, after the metal tried and fail last week to break below a rising trendline in place for two years.

"There was a three-day bottom formed at $1,160 last week, and the market held there well. From a short-term technical perspective, it is indicative of a market that does perform well and will possibly advance to another level" above $1,200 an ounce, Meyers said.

If so, then gold is on the track to a better autumn. It still has some headway before reaching $1,200, as seen in its recent difficulty with the $1,190 level, but the technical picture is brightening. Maybe tomorrow will be three-time-lucky for $1,190.

U.S. Mint Bullion Coin Sales Down Slightly From Last Month

The July 2010 U.S. Mint sales figures for bullion coins are in, and for gold they show an overall drop from last month's elevated levels. Still, Eagle sales of 175,000 oz. are up 103% from July of '09.

This month, fractional Eagles were only 2.6% of all bullion sales; last month, they accounted for almost 30%. The spike-up is due to their late debut last month; a lot of the sales reflected pent-up demand for the fractionals. That demand now satisfied, the one-ounce Eagle is back in its usual predominant position. The Buffalo continues to sell well, but well below the figures for the one-ounce Eagle.

Indian Gold Demand Holding Up

According to a Reuters India report, gold demand from traders is still strong.

India gold traders continued to book deals on Tuesday afternoon as international prices stayed steady while the rupee strengthened making the dollar-quoted asset cheaper, dealers said.

Most of the deals are at $1,180 an ounce and sales are averaging 200 kgs daily in the past one week, said a dealer with a Mumbai-based state-run, bullion-dealing bank, whose imports rose by 90 percent on month to 3.8 tonnes in July....

"Prices below $1,180 are attractive for Indian buyers," said another dealer with a private bank in Mumbai.

That number is up slightly from the $1,175 of one to two weeks ago, likely because of a strengthening rupee.


Speaking of Indian demand, Edel Tully said in a note that physical demand has been fairly high.

"...the presence of very decent physical demand emits positive sentiment. Its persistence indicates that gold is trading more in line with its fundamentals," Edel Tully, precious metals strategist at UBS, a large supplier to India, said in the note.

UBS's five day moving average of sales to India was the highest since late Nov 2008, she added....

In fact, demand has risen to the point of making an upwards revision to the July import figures possible.

Gold-Company Takeovers Set Record

The acquisition trail has been hot this year, with several deals contributing to $32 billion' worth of takeovers this year. It's only early August, and the gross value of deals has already set a record.

“The reason why we may have seen a pickup in activity this year is because gold prices are around $1,200” an ounce, said Greg Fournier, Hong Kong-based head of Asia Pacific region metals and mining investment banking at Merrill Lynch. “If you have a view that the gold price is strong and is going to go higher then acquiring more reserves or producing properties today makes sense.”

Also a factor is gold majors wanting to increase their resource base in a time when new gold deposits (particularly big ones) are becoming harder to find.


It's only a matter of time before takeover interest will move to smaller deposits. Because of the general fascination with huge-potential properties, the development companies with smaller properties have been overlooked - even ones with good grades. Although less convenient and less easy to manage, someone who's adept at a portfolio approach could put together an agglomeration of smaller properties and wind up with a mid-tier or even a major by collecting those leftovers. Given their low profile, they're likely to be cheaper than a major elephant.

PRC Opens Up Gold Market Further

The mainland Chinese gold market is being opened up further to foreign trading companies, and more banks are being allowed to import and export gold. Overseas hedging restrictions are being dropped.

The reason why is booming gold sales.

Gold demand in China, the world’s largest producer, gained in the first half as government measures to cool the property market and falling equities spurred investment, the Shanghai Gold Exchange said July 7. Spot gold gained to a record in June as investors sought to protect their wealth amid concerns about the global economic recovery.

“China’s domestic production of gold, albeit the largest in the world, cannot satisfy its demand,” said Ellison Chu, managing director at the precious-metals desk at Standard Bank Asia Ltd. in Hong Kong. “By allowing more foreign participation and more Chinese commercial banks to import and export, China can better balance its demand and supply.”

It's interesting, given that PRC mercantilism typically favours producers. My own guess is a decision has been made to let gold be accumulated by the mainland Chinese people rather than through official forex reserves. The latter move might come later, but not without a substantial decline in prices. The PRC monetary authorities might have been waiting back in February to see if they could get a lower price than the Indian central bank: that price point makes sense as a competitiveness metric.

Gold Inches Up, Stays Below $1,190

After an initial dip to slightly below $1,180, gold picked up last night but kept below $1,185. The metal stayed between those two values except for blips until 6 AM ET. Although breaking through $1,185, the metal stalled in the high 1180s after touching $1,190.20. As of 7:58 AM ET, the spot price was $1,185.90 for a gain of $3.90 on the day. The Kitco Gold Index attributed -$0.20 to predominant selling and +$4.10 to weakening of the greenback.

As the Euro continues its run upwards, the U.S. Dollar Index is still under pressure. After hovering around 80.95 last night, it made a run up to 81 which reversed around 2:25 AM. Dropping farily rapidly, its decline leveled off for an hour and a half before continuing more slowly; by 6:10, it was below 80.5. After a slight recovery, the Index found itself above 80.6. As of 8:07, it was at 80.63.

A Reuters report ascribed gold's rise in thin trading to a weaker U.S. dollar, plus expectations of Indian jewelers stocking up for festival season.

"I would look at the upside for gold being capped," said Ong Yi Ling, an investment analyst at Phillip Futures in Singapore, who pegged key support at a three-month low of around $1,150.

"And hence, we might actually see gold edging down a little bit if the economic data come in better than anticipated, like the consumer spending and personal income figures."....

"The market is quiet today with light buying interest from investment. But we did see some buying from India as it builds up stocks for the festival," said a physical dealer in Singapore.

The article also notes holdings of the SPDR Gold Shares Trust remained unchanged yesterday.

A more recent Wall Street Journal report also pointed to the weaker greenback.

"It looks like gold is starting to receive support from a weaker dollar and is on its way to re-establish a more normal negative correlation with the [dollar]," SEB analyst Bjarne Schieldrop said....

"Gold has once again started decoupling from the U.S. dollar," said VTB Capital analyst Andrey Kryuchenkov. "Gold's rolling monthly correlation to the U.S. currency fell to around 68% from highs above 85% last month. So, given a further improvement in risk sentiment from here, the correlation is set to weaken even more with gold prices tracking firmer PGMs [platinum group metals]."

The article also cites Edel Tully disclosing that UBS gold sales in India yesterday were the second-highest for any day this year.

U.S. disposable-income and consumer-spending numbers for June came in, and the 0.2% rise in the former and 0.1% rise in the latter [flat after inflation's factored in] matched expectations. The only effect it had on gold was to push the metal down a couple of dollars, which were tacked back on shortly afterwards. As of 8:51 AM, the spot price was $1,186.80 for a gain of $4.80 on the day. The Kitco Gold Index split the gain into +$0.10 for predominant buying and +$4.70 for a weakening greenback. The U.S. Dollar Index slumped back to 80.49, with an earlier decline helped along by the income and spending data. As of 8:54, it had mostly recovered to make 80.58.

So far, gold hasn't moved much. The upside may indeed be capped, as Ong Yi Ling said, but the downside seems capped as well. Although it's too early to say an all-out recovery is in place for the metal, it's looking fairly good as compared to late last month. Gold today might test $1,190, as it did yesterday.