Gold Recovers Overnight, But Still Below $1,100

The EU summit has begun, with no definite pledge to aid the Grecian government except for a continued relaxation of collateral rules by the EU central bank so as to keep Grecian sovereign debt as qualified collateral. German Chancellor Angela Merket welcomed the IMF to take a subsidiary role in any rescue package. There's already speculation that an IMF role will reflect badly upon the Euro, driving it down more.

Gold spent the bulk of the overnight session climbing, although $1,100 still remains well out of reach. Initially, the metal trundled along in the $1,085-$1,087.50 range until it pushed up to $1,090 a little after 9 PM ET. Failing to break through that level, it hung around the $1,087.50-$1,090 range until 3 AM, when it did get above the latter level. The subsequent rise was uneven, but it proceeded until it was stopped at $1,095 at 6:10 AM ET. A second attempt to break through got it to $1,097 just after 7:30, but $1,095 held. As of 8:05 AM ET, spot gold was at $1,093.40 for a gain of $5.90 on the day. The Kitco Gold Index attributed $4.00' worth of the gain to greenback weakness and $1.90's worth to predominant buying.

The U.S. Dollar Index spent most of last night falling, although the decline reached its lowest level of 81.725 as of 9:30 PM. A relief rally led to another decline, which bottomed at a higher level than 9:30's. A sharp rally beginning at 12:20 AM and ending at 1:25 drove the Index from 81.75 to 82.07, but that rally prefaced an uneven but definite decline that pulled the Index down to below 81.6 by 7:20 AM. Since then, it's rebounded slightly. As of 8:13 AM ET, the Index was at 81.69.

A Wall Street Journal article said that gold rebounded due to a relief bounce in the Euro, although the summit meeting is being watched closely by Euro bears for any sign of further weakness.

Traders said the market is bracing for currency volatility during the two-day European Union summit that began Thursday, with many expecting a further fall in the euro against the dollar to trigger a selloff in gold.

The metal looks more vulnerable following its break below technical support at $1,088 a troy ounce Wednesday, they said.

"It's still sell on rallies because the turnaround in the euro isn't finished," said Narayan Gopalakrishnan, a trader at Swiss trading house MKS Finance in Geneva. "Any rallies around $1,095 to $1,098 people are looking to sell [gold]."

Physical buying is picking up at these levels, though.

A Reuters article points to the same cause, but adds that continued strength in the greenback has limited gold's gains.

Gold, which hovered below the closely watched 50-day and 100-day moving averages, has failed to attract safe-haven buying this week despite fiscal worries about Greece, with losses in equities market putting additional pressure.

Jeweler demand did pick up, but not by much; there's an awareness that gold is technically weak now and could fall further.

Regular trading opened indecisively, with gold fluctuating between $1,093 and $1,094. A spike to $1,095 right at 8:30 failed to hold, and the metal descended back to its range. As of 8:44 AM ET, spot gold was at $1,093.70 for a gain of $6.20 on the day. The Kitco Gold Index apportioned the gain into +$2.70 for predominant buying and +$3.50 for a weakening greenback. The U.S. Dollar Index hasn't done much in the same timespan as the relief rally turned into a double top; as of 8:46 AM ET, it was at 81.70.

So far, things look fairly good for gold even if it can be chalked up to a relief rally. Today's trading will show if overnight gains were more than a dead-cat bounce.