Gold Slumps Slightly Overnight, Stays Steady

It's becoming eventful in the renminbi forward market. Thanks in part to U.S. forbearance with respect to branding the PRC a currency manipulator, it looks like the authorities in the latter country are going to be moving to a managed upvaluation. For whatever reason, the greenback benefitted from the move. Continued worries over Greece also helped the greenback, particularly against the euro. In central bank news, the Bank of England is sticking to its current easing mode. The 0.5% BoE rate and the current quantitiative-easing program are both remaining in place. Through it all, the gold market yawned.

There was a slight descent last night, as the metal reached $1,145 by 10 PM ET. That drop established the bottom of a trading range, one that was hardly broken in the overnight session. The range, between $1,145 and $1,148, was tested at about 12:45 AM and breached for about an hour starting at 3:45. The overnight low of $1,143.10 was made at 4:30. Once restored, the range held for the rest of the early-morning session until it was tested again just before 8:00. As of 8:03 AM ET, spot gold was at $1,145.10 for a drop of $3.40 on the day. The Kitco Gold Index split the loss into -$2.40 for a strengthening greenback and -$1.00 for predominant selling.

As broached above, the U.S. Dollar Index spent most of the overnight session on a gaining track. It went up for the first few hours of the session, reaching 81.75 as of 9:45 PM. Sliding back after double topping, the Index bottomed at just above 81.6 as of 11:25. After remaining largely directionless until 2:00, it rallied all the way up to 81.89 between 1:55 and 3:55. An attempt to push above 81.9 sputtered, and the Index slumped back to 81.65 as of 6:45. A double bottom was made at 7:05, after which it started rallying again. As of 8:13 AM, the Index was at 81.79.

This morning's Reuters report ascribed gold's relative steadiness to it being held back by U.S. dollar strength.

Buying driven by fears over the euro zone's fiscal issues has so far counteracted euro weakness, which would normally have been a powerful downward force on gold. However, persistent strength in the dollar is likely to weigh on prices in future, analysts said.

A Bloomberg report suggests that the loss in momentum overnight may be a prelude to gold falling, as a stronger greenback combines with an overbought position to make for a selling opportunity.

The “gold price down direction is set by a stronger dollar,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. Any details of ECB plans to withdraw emergency stimulus measures may also affect bullion, he said.

Other analysts quoted see the current uptrend as still intact, as gold gains against all currencies. Also mentioned in the report is an increase in the SPDR Gold Shares Trust holdings, of 0.91 metric tons to 1,130.74. This holding makes for another 2010 record.

The weekly initial U.S. jobless claims report has been released: it showed an unexpectedly high number of 460,000 seasonally adjusted. Expectations were for an unchanged 442,000 instead of the 18,000 rise actually reported. Although gold was on a roll when regular trading began, the number seemed to add a push to it breaching the above-mentioned range on the upside. As of 8:41 AM ET, gold had shifted from a loss on the day to a gain: the spot price was $1,149.50, up $1.70 on the day. The U.S. dollar component of the Kitco Gold Index was still negative, in the amount of $1.70, but predominant buying was +$3.40.

The U.S. Dollar Index itself was unchanged as of the time of the release, although it had been slumping since regular trading began. A short-lived dip as of 8:35 was reversed more than five minutes later, and the Index drifted at the 81.75-81.76 level. As of 8:45, it had fallen back a little to 81.73.

A fall expected by the Bloomberg report's sources may be fended off today, but it's hard to argue that gold isn't due for one. So far, it hasn't appeared.