Gold Continues To Rally

The OECD issued a report saying that global recovery is in place, although it expects growth to be relatively tepid, but the cost in terms of sovereign debt is going to dog the OECD economies unless stimulus is withdrawn. The Euro fell after Ben Bernanke said that Fed-provided dollar swap line won't last forever, and an issue of German bonds was received badly by the market. [Given how bunds have performed recently, that reception was a bit odd.] For most of the overnight session, gold rose.

The rally started slowly; for the night part of the overnight session, it might as well have been a trading range between $1,200 and $1,205. The latter level was scaled just after midnight ET, but the metal hung around it until just after London trading opened at 3:30 AM. The ensuing rally lasted for more than two hours; as of just before 6:00, the metal hit its high of $1,216.00. Pulling back below $1,215, it hovered around $1,213 as its approached the opening of the pit shift. As of 7:58 AM, the spot price was $1,212.80 for a rise of $11.60. The Kitco Gold Index attributed +$15.30 to predominant buying and -$3.70 to a strengthening greenback.

The U.S. Dollar Index did rally overnight, with most of the gain being made in the evening, but it didn't climb above 87. From the late-afternoon low of 86.34, the Index rallied to almost 86.9 by 10:00 PM. A pullback that lasted until 12:25 AM gave way to another rally that topped out at a little below 87. Afterwards, a larger pullback ensued; the Index didn't regain its old highs despite a subsequent rally that faded. As of 8:07, it was at 86.62.

A Wall Street Journal report ascribed gold's latest rise to continued qualms over the Eurozone's debt problems.

The renaissance of riskier assets seen since the global economic downturn has come to an abrupt end, putting assets like gold, Treasurys and the dollar firmly on the map in an increasingly risk-averse environment....

But the fact that gold hasn't soared to a record, as many had expected, reveals that investors are opting to choose the dollar, not gold, as a safer alternative during the current flight to safety, industry players said.

"The global flight for safety didn't spare gold prices...over the past week, investors have been choosing the dollar above all as euro-zone jitters continue to haunt markets," said Andrey Kryuchenkov of VTB Capital.

Gold has joined the list of assets investors have been reportedly selling to cover losses in equity markets, according to Mark Pervan, head of commodities research at ANZ. At the same time, Mr. Pervan noted investors are taking profits in gold as they seek cash to shore up losses on other positions, keeping a lid on the precious metal's gains, for now at least.

Also mentioned is rising fears that the European sovereign-debt meltdown is acquiring undertones of the subprime mortgage crisis. Demand for physical gold continues to be high.

A Reuters report also says safe-haven buying is behind the rise. Near the top, it mentions that the dip-buying through the SPDR Gold Shares Trust continues with the ETF adding 30.43 tonnes to its holdings yesterday. Those holdings are now at 1,267.32 tonnes, another new record.

Prices are recovering after falling 4.5 percent last week as concern over the euro zone's sovereign debt crisis sparked selling of assets seen as higher risk, like stocks and commodities.

"Same old story for gold -- initially lower on commodity liquidation as people need cash, and then up on (the view of) gold as a currency investment," said Simon Weeks, head of precious metals at the Bank of Nova Scotia.

"With strong ETF demand and the man on the street buying gold coins in northern Europe, it's not surprising that we are now higher."

Tensions between the two Koreas were also mentioned as supportive of gold.

A Bloomberg report, as webbed by Business Week, concurs with the above two about the cause.

“Markets fear that the crisis in the banking sector in Europe could re-emerge,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. Investors may be taking money out of assets such as Treasuries and buying equities and commodities like gold, he said....

“Gold is again benefiting from safe-haven flows as uncertainty and risk aversion across markets persist,” said Stefan Graber, a Singapore-based analyst with Credit Suisse AG. “We expect gold to continue to attract fresh flows in the near term. Even a test of the previous high is possible.”

Also mentioned is Bloomberg's tracking of ten gold ETFs; the total adds yesterday was 33.3 tonnes.

The April durable-goods data for the U.S. economy are out, and the raw number beat expectations: a 2.9% gain instead of the expected 2.5%. Ex-transportation goods, orders fell 1.0%. The release of the number had no immediate effect on gold, which fluctuated around $1,213 until 8:45. Then, it dipped quickly below $1,210 before stalling. As of 8:52, the spot price was $1,210.10 for a gain of $8.90 on the day. The Kitco Gold Index assigned +$16.10's worth of change to predominant buying and -$7.20's worth to greenback strength. The U.S. Dollar Index was the prime beneficiary of the release, to the extent it had any influence on either. From below 86.7, the Index rallied smoothly to almost 87; as of 8:55, it was at 86.95.

So far, gold has been performing better than I had expected it to. Physical demand is still strong, and the newfound trend of dip-buying through the ETFs is continuing. The quoted experts above range from sanguine to outright optimistic. Perhaps the dip is over this 'time round; if today's action follows recent patterns, then the sanguinity will be justified.

Gold Rallies Again In Morning Trading, Breaks Above $1,200

Although the advance was ragged, gold poked up above $1,200 in mid-morning trading before falling back. The rally started at 8:40 AM ET, when the metal had bottomed at a little below $1,190. After lumbering up for the next two hours, it reached a morning high of $1,201.40 at 10:40 AM. Since then, it pulled back to the $1,198 level; a further dip was all-but reversed. As of 11:42 AM, the spot price was $1,197.90 for a gain of $5.60 on the day. The Kitco Gold Index attributed +$12.70 to predominant buying and -$7.10 to strength in the greenback.

The U.S. Dollar Index remained below its early morning high of 87.445 despite a later attempt to best it: that try topped out at just below 87.4 as of 9:10. Bottoming at just below 87.0, the Index fluctuated around the 87.05 level after that bottom was reached. As of 11:44, it was right at 87.05.

Again, the morning part of the pit shift has been pretty good for gold. Although the $1,200 barrier was not scaled, the metal appears headed for a second gain in a row. Whether it does will be determined by the action of the afternoon session.


Update: As the pit shift closed, gold continued to meander around the $1,198 level. There was another challenge of $1,200, but it came to naught without making a new daily high. No serious dip took place, either; overall, gold fluctuated. As of 1:29 PM, the spot price was $1,198.10 for a gain of $5.80 on the day. The Kitco Gold Index assigned +$10.50's worth of change to predominant buying and -$4.70's worth to greenback strength.

Despite that overall strength, the U.S. Dollar Index fell as the 87 barrier was broken through once again. Unlike mid-morning's dip below, this one proved to be more sustainable. Dropping to almost 86.9 as of just before noon, the Index recovered only to just below 87; a trading range ensued that was centered at about 86.9. As of 1:38, it had recovered to the upper end by hitting 86.98.

Another pit shift ended with gold higher than it was at the beginning, and with an overall gain on the day besides. There's a good chance the metal will hold its gains, leaving gold with a second daily advance in a row.


Update 2: Not only did it hold on to its gains, but also it closed above $1,200. Gold tested the $1,200 level a third time at 2:45 PM ET subsequent to slumping in a post-pit letdown. Falling back to a little below $1,198, the metal slowly advanced back up to $1,200. The level itself was broken at 4:15. After some time hesitating around it, gold climbed slightly over before dipping back down to it. A last-minute spurt at 5:00 notched up a new high of the day, $1,205.50. Although descending again afterwards, the metal still managed to end regular trading above $1,200. At the close, the spot price was $1,201.20 for a gain of $8.90 on the day. Unusually for the recent period, the Kitco Gold Index partitioned the daily gain into two sub-gains. It was split into +$7.80 for predominant buying and +$1.10 for a weakening greenback.

That overall weakening resulted from the U.S. Dollar Index taking a tumble in the later afternoon. Right after 1:30, the Index inched up to around 87. Starting at 2:05, it dropped; although broken up into stages, the tumble took the Index all the way down to 86.34 when 5:30 rolled around. From its high at 6 AM, it lost about a hundred and ten basis points.

Its daily chart, from Stockcharts.com, shows how volatile the day was:



Since the cut-off time for the chart was earlier than 5:30, the day's candlestick shows a slight gain instead of a loss. It also shows the Index touching a new fourteen-month interday high, as well as it falling as low as 85.5. All told, it had one of its most volatile days: the total spread was about two full points.

Coming near the top of a large run, its action isn't very cheering. Volatility combined with overall directionlessness at the top of an extended run suggests distribution; it's more consistent with a reversal than a continuation. At this level, the Index is very close to being overbought.

Also, and more significantly, its MACD lines are very close to a bearish crossover. Found at the bottom of the chart, the black line and the red line are almost on top of each other. So far this year, a bearish crossover hasn't signalled a rout but has signalled a decline of some note. Most typically for the current bull run, it's signalled a lumbering downturn that lasts for some time even though such downturns haven't sliced an awful lot off the Index. I may be jumping the gun, but the action between the chart's end and 5:30 suggests that the lines are going to cross over soon. If precedent is followed, any decline will be orderly. The only reason to not expect an orderly downturn is the Index's present overextendedness.

The day was better for gold, as its own daily chart shows:



For such an extended decline, one that nearly was an all-out correction, gold's rally these past two days has been fairly robust. Although gold's own MACD lines are still in a bearish configuration, an all-out rout would not have seen a two-day stretch as strong as the one the last two days have shown. In retrospect, it looks like the dip that everyone was supposed to buy on ended last Friday.

That's not to say that gold will not go lower, but it does speak to bargain hunting around the $1,175 level. Without a plummet shooting the metal down well below that price point, there was no incentive to lower it significantly. Should gold turn down without that kind of a plummet occurring, bargain hunting is likely to kick it around $1,175 again. Unusually for the ETF, the SPDR Gold Shares Trust's holdings have shown large buying on the dip recently.

One interesting facet of today's action is the breaking of the recent concurrency, to gold's benefit. The gold-greenback relationship has not gone back to an inverse correlation, but there are hints of the more standard pattern reasserting itself. Gold suffered more of a post-Eurocrisis letdown, after it getting less overbought than the U.S. Dollar Index did, so it's fitting in a way that the metal would fare relatively better today. During previous let-ups, the Index would sink after reaching new plateaus and gold would rise because the cost of the bailouts began to sink in. This iteration, it was different because both rose even though the Index had the stronger run. With gold's recovery, we may be seeing the same hangover effect reassert itself.

The end-of-pit Reuters report ascribed gold's rise to continued safe-haven buying, and contrasted the metal's performance to platinum and palladium's plummets. Amongst other points therein, these were included:

* Gold pushed higher in flight-to-safety buying as investors worried about wider financial market health - traders.

* Gold's relative strength when compared with steep losses in industrial metals, including platinum and palladium, made its moderate gains seem even stronger - traders....

* Gold's upside was limited as the euro fell to a near four-year low against the dollar and as many investors' need for cash outweighed their desire to stash that cash in a safe asset like the precious metal - traders.

In and of itself, this last item may explain why gold rose above $1,200 in later afternoon: the stock markets recovered, as did the Euro.

To sum up, the metal put on a good show today despite some headwinds remaining. There may be another pullback as June approaches, but recent action suggests that it'll be met by bargain hunting. The traditional slow season for gold may not be that bad after all; certainly, its recent fate has been much better than platinum's and palladium's.


Special Note/Thanks: Mid-afternoon, this blog's visitor count reached 10,000. [It's located on the left just below the "About Me" section.] I'd like to thank everyone who's stopped by, especially the regulars, for making it happen. I couldn't have done it myself...they check.

WSJ Columnist Asks If Gold Is In A Bubble

Although some sections in the mainstream business media are still wondering if gold's in the climax of a bubble, or in the throes of a bubble bursting, ROI's Brett Arends asks if gold's on the verge of one. The graph that accompanies his story paints an eye-opening picture:



Arends is sensible enough to point out that a lot of gold's rise over the last decade was from a really undervalued level, before he returns to the incipient-bubble question.

So far gold has followed the same path as the previous two bubbles. And if it continues along the same trajectory—a big if—gold today is only where the Nasdaq was in 1998 and housing in 2003.

In other words, just before those markets went into orbit.

Maybe the smart money is out of gold today. But how easily we forget that the smart money got out of these past bubbles way too early. The really smart money knows you make the most money in a bubble right at the end, when it goes manic....

Arends lays out the case for gold going in to an all-out mania by noting that analyst coverage, general buzz and the contango on the futures market are all far from mania levels. In other words, gold has none of the earmarks of manic buying right now. His case for gold going into a mania rests on these four points:

1. There's likely to be another mania somewhere, since we live in a bubble economy.
2. The floods of liquidity pumped in by central banks has laid down fodder for a New Era story, or a "This Time It's Different" narrative. (Arends' term.)
3. There are a lot of gold believers who are quite willing to spread word around about gold. This transmission belt of sort will likely generate a lot of demand once the public's ears are ready for the message.
4. Gold is hard to value, giveing a large zone of indeterminancy (from the quant perspective) that can be filled by bullish imaginations.

Arends also passes along this fact from Dylan Grice: the value of gold in Fort Knox is near an all-time low as percentage of the M1 money supply's. Grice also said that the 1970s gold bubble ended with M1 coverage hitting 100%; it's currently 15%. [The bull market in gold began at a time when gold's purchasing power was at a low not seen for centuries.] Arends ends by saying that these reasons suggest that gold might enter into a bubble, but anyone getting genned up should realize that gold is very volatile and sometimes dangerous.


What can I say? He lays the case out more meticulously than I have, but his position squares with my own.

If gold does go into an all-out mania, the signal question is when to get out. If gold is fated to be popped when only a bubble in the making, then the question is moot. The only way it could be pre-popped is if the deflationists and Japan-comparers are essentially right. Unfortunately, U.S. Treasury securities have a low yield right now: using T-bonds as a hedge is pretty expensive. The last decade, unlike the 1990s, was one where inflation grew with growth. Thus, the most realistic alternative would be deflationary stagnation. Stocks really won't cut it as a hedge.

Using Grice's note about the 1970s peak and his current figure gives a price of about $6,000 as a potential top. Another one like it was the gold/DJIA cross: very briefly, at the top, an ounce of gold could buy one unit of the Dow Jones Industrials. That seems unlikely at this point, as it would imply a gold price well above $6,500 unless the Dow worsens its March '09 low. The graph above suggests a triple from the current price before the mania comes to a crashing halt: that says $3500 or so. Note the wide variance in plausible tops.

The fact is, the ultimate top should a mania ensue is unpredictable. Market karma being what it is, the monthly returns will be hottest right at the end. The people who stay to squeeze a little more of those returns will be the ones caught in the ensuing crash, which will look like a mere dip to be bought at the time.

The only suggestion I have would be to stop buying gold entirely if it gets above $3,000/oz. No matter how compelling the returns, no matter how permanent the rise looks, not matter if cash is trash and other investment ideas look rotten - even if it looks like we're careening into global hyperinflation. In the throes of a gold mania, there will be some plausible, hard-to-ignore, even compelling cases that hyperinflation is "imminent." They'll feed the mania.

When to sell is a decision that, I can almost guarantee, will come with loads of regret if followed through upon. Given bubble karma, that's inevitable. It seems best to get mentally prepared for doing so.

One alternative, that's not often explored, is to ride the bubble to its top and pull out when the sucker's rally gets started. This decision is less regret-laden, but it's very tricky. It could be pegged as the contrarian's finest moment: switching to bearishness when all around are seeing another buying opportunity. What makes this approach very hard is that the earlier in-bubble scare will look a lot like the sucker rally. People will remember the new highs after the 'scaredy cats' exited, like the ones who sold out of Internet stocks in 1998. 2000 looked an awful lot like '98 until the bottom fell out again. By that point, of course, it was too late.

Playing the bubble requires a permabullish attitude. Getting out means shaking it off. Very few people can do that.

Thanks to good old market karma, there really are no good choices. The standard advice is to sell too soon and live with the regret.

Indian Spot Gold Reaches New Record

Chalk up another new record high for gold in another currency. According to The Press Trust of India, gold hit an all-time high of 18,660 rupees per 10g "on aggressive buying by stockists and jewellers for the ongoing marriage season amid a firming global trend." The last record was made on December 3rd of last year - about the same time that the previous record was made in U.S. funds.

Indian Gold Imports Soar To 34.2 Tonnes

The real figure for April was much higher than the expected 27-30 tonnes. According to a report from the Economic Times, the true figure was 34.2 tonnes as compared with 20 tonnes in April of '09.

Gold Muddles Along In Overnight Session

Despite more fear-related dives in the stock markets, the Euro and crude oil, gold didn't move all that much in the overnight session. Although the metal did not participate all that much in the lastest fear-driven run-up of safety assets, it didn't get driven down like so many other asset classes last night. It dropped for a time in the evening, but recovered later in the night.

That drop, starting around 9 PM ET, took the metal down about five dollars an ounce. Reversing shortly afterwards, gold climbed up to $1,196.50 around midnight ET. That price marked the high of the day so far. After making it there, the metal slid down to the high 1180s before London trading opened. Since then, it was fluctuating between $1,187 and $1,192 before breaking through on the upside around 7:30. As of 8:01 AM, the spot price was $1,192.90 for a gain of $0.60 on the day. The Kitco Gold Index attributed +$9.60 to predominant buying and -$9.00 to strengthening in the greenback.

The U.S. Dollar Index continued its rally, which started in early afternoon, until 6 AM. Although there were stalls and a couple of minor pullbacks, its climb was fairly steady until its high of 87.44 was reached. That made for a more than a hundred and thirty basis points added over the course of seventeen hours. Since the top, a minor but sustained pullback turned into a drop that carried the Index down well below 87.2. As of 8:09, it was at 87.13.

A Bloomberg report, as webbed by Business Week, began by speculating that gold may fall as it continues to be used as a piggy bank to cover losses in other assets.

The euro slid against the dollar after the International Monetary Fund urged Spain to do more to overhaul its ailing banks, adding to speculation that European financial institutions may face greater losses....

Gold is “vulnerable to further cash-generating selling in the short-term given the volatile swings across the broader financial markets,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a report. Increasing ETF holdings and coin and bar purchases continue to “highlight investor diversification towards safe-haven asset types and should limit the impact of long liquidation in gold.”

The report also quotes Dennis Gartman colourfully explaining why falls in other assets can drag down gold:

“We fear that commodity prices are about to come under very real pressure as a result” of a stronger dollar and falling equity markets, said Dennis Gartman, an economist and editor of the Suffolk, Virgina-based Gartman Letter. “This shall be especially true if the margin clerks begin to sharpen their knives as share prices weaken, for they will begin to look for any and all places from which to get liquidity.”

And yet, as also mentioned in the same report, holdings in the SPDR Gold Shares Trust (GLD) jumped up by a more-than-usual amount to a new record of 1,236.89 tonnes. The 16.74-tonne jump was much more than a more normal single-digit increase, suggesting that enough players big enough to rate issuance of more GLD shares are seeing the current dip as a buying opportunity. The report also notes that tensions between the Koreas are escalating.

An earlier Reuters report ascribes gold's fall last night to safety-trade players favouring the greenback for now.

"The pull from the dollar's just been too strong for some today so they're selling into it, but that doesn't mean gold's had it," said a bullion trader in Sydney.

"There's plenty of support for gold left out there."

The mounting war of words on the Korean peninsula as South Korea announced steps to tighten the vice on the North's economy in punishment for sinking one of its navy ships was also triggering some buy orders, the trader said.

Gold briefly staged a recovery above $1,195.00 an ounce after reports North Korean leader Kim-Jong-il had told his military it may have to go to war if the South attacks first, but the price quickly retreated.

So, the escalation did have an effect on gold albeit temporarily. Also mentioned in the report is a Citibank note that expected "scale-in" buying at $1,165.

A Wall Street Journal report contrasted gold's steadiness with drops in other precious metals.

Tension between North and South Korea and worries over Europe's sovereign debt issues with Spain now in the spotlight could propel investors to gold as they seek assets deemed safer over the likes of equities....

Flight-to-quality buying has been the main driver of gold prices this year, said HSBC analyst James Steel. Traders said this trend could continue to benefit gold due to geopolitical nervousness in Korea and risks that sovereign debt in Europe may not only crimp growth in the region but globally.

Also mentioned in the report is UBS sticking to its forecast of $1,300 gold.

A blip-up carried gold close to $1,197 before it pulled back into a decline that continued when regular trading opened. Bottoming at below $1,190, the metal partially recovered after 8:40. As of 8:55 AM, the spot price was $1,192.60 for a gain of $0.30 on the day. The Kitco Gold Index assigned $10.15's worth of change to predominant buying and -$9.85's worth to greenback strength. The U.S. Dollar Index's decline ended at the 87.1 level, and it started to rally around 8:40. As of 8:57, it was at 87.29.

So far, gold's action in today's regular trading has been like the overnight session in miniature: a dip, a rise, but not much change overall. Still, the metal may rally later in the morning.

Gold Leaps In Two-Stage Rally, Continues Up

After starting off near the lows of the day, gold leapt upwards in two stages during the morning part of regular trading. Coming out of the gate, the price jacked up six dollars an ounce to reach above $1,189 by 8:50 AM ET. Pulling back, the metal fluctuated around the $1,187.50 level until just after 11:00. Then, the second stage of the rally kicked in. Starting below $1,188, the second leap took the price to $1,194.80 before sinking back starting at 11:15. As of 11:45, the spot price was $1,192.40 for a gain of $15.40 since last Friday's close. The Kitco Gold Index attributed +$26.20 to predominant buying and -$10.80 to strength in the greenback.

The U.S. Dollar Index fluctuated between 86.5 and 86.25, with a downward bias near the later part of the morning, until breaking through the lower end of the range. After an early-morning run peaked at 86.51 as of 8:20, the Index drifted back downwards to just above 86.25. A quick recovery to almost 86.5 presaged another downtrend, which took it down to a little below that same 86.25 by 11:30. As of 11:45, it was at 86.17.

So far, the metal's recovery is fairly solid. The greenback rallied when gold didn't early this morning. The regular-trading rally gold's enjoying, without the U.S. dollar participating, could be seen as gold catching up to the greenback. How sustainable gold's rally is, will be seen in the afternoon part of the session.


Update: There wasn't a third leap-up, but gold crept up after its pullback ended at about 11:30 AM ET. Its climb took it up to a new daily high of $1,196.90 before it slumped back again. As of the end of the pit shift, 1:30 PM, the spot price was $1,193.90 for a gain of $16.90. The Kitco Gold Index assigned +$26.40's worth of change to predominant buying and -$9.50's worth to greenback strength.

The U.S. Dollar Index continued to slump down, although slowly and hesitently. After poking at 86.15 from the upside, it fell through that level at 1:00. Pulling back up, it again sunk below that level temporarily. As of 1:38, it was 86.15.

So far, there's been a real recovery in place for gold. It may not last during the rest of the week, but it's likely to last today. There's almost a certainty of gold closing with a solid gain.


Update 2: It did, although at a slightly lower price than the one at the end of the pit shift. When the electronic-trading hitch began, gold continued to rise a little. A new daily high of $1,198.00 was made around 2:30 PM ET. From that peak, the metal started sliding down: at first very slowly, the tempo of the decline picked up as the close approached. At the end of the day, the spot price was $1192.30 for a solid gain of $15.30 since Friday's close. The Kitco Gold Index attributed +$29.40 to predominant buying and -$14.10 to strength in the greenback. The two figures sum up to the raw change.

The U.S. Dollar Index's sinking ended when it bottomed at just below 86.1 right after 1:30. Subsequent to that bottom, the Index advanced fairly steadily to 86.47 by 4:40. After a pullback, it managed to rally to above the 86.5 level that had been a top for advances earlier in the day. As of 5:30 PM, the Index was 86.525.

Its daily chart, from Stockcharts.com, shows the decline of the previous three sessions being reversed today:



Averted was a switch of the MACD lines, found at the bottom of the chart, into a bearish configuration. It was close, but the lines are still in a bullish cross. Despite the Index's close upwards, those lines were closer today than they were yesterday.

Although not back into oversold territory, the RSI line at the top of the chart is close to that plus-70 zone. The Index's recovery from its drops in the last half of last week show that its pullback has been fairly orderly. There have been no real air pockets that have shot it down. The Euro, of course, is still under a cloud.

Turning to gold, its fortunes improved today as its own daily chart shows:



Unlike the U.S Dollar Index's, the short-term decline in gold has been fairly serious. Its own RSI line dropped to a little below the 50 level, indicating neutrality, and its own MACD lines are firmly in a bearish configuration. Today's rally does resemble a relief rally.

It did move up today, though, and part of the reason is bargain hunting. Despite the daunting action over the last two weeks, the fact that bargain hunting kicked in shows that gold's decline has limits. It too is bolstered by continued troubles in the Eurozone.

Was last Friday's drop the end of a short-term dip? It's impossible to say at this point, but I have read of $1,175 being thought of as a bargain level. Interday, Friday's decline got below that price point.

The post-pit Reuters report pegs gold's advance as caused by flight-to-quality buying. Amongst the points made therein, these were included:

* In this environment, gold up despite weaker euro as a sign of increased risk - James Steel, metals analyst at HSBC....

* Sovereign risk crisis in Europe far from over. Should continue to bode well for gold through summer - Bill O'Neill, managing partner with LOGIC Advisors.

* Money managers increased their net long positions in U.S. gold futures by more than 2,000 lots in week ended May 18 - U.S. Commodity Futures Trading Commission.

The metal may make it above $1,200 if Eurotroubles continue, but the momentum of two weeks agon has clearly gone. We may see a muddle tomorrow.