Gold Bobbles, Then Pokes Above $1420

The beginning of 2011, and the end of the holiday doldrums, saw gold fall from $1422 to around $1,416 in quick order when overnight trading began. Hovering around $1416 until 11 PM ET, it first bobbed up and then began climbing early in the morning. Failing to push above $1,420, the metal settled back down to $1,418 before launching a new thrust at 3:30. That one did make it above $1420, but only briefly; the price slid down and paused between $1,418 and $1420. 7:30 saw another attempt to get above the $1420 level. As of 7:39 AM ET, the spot price was $1,421.60 for a break-even from last Friday's close. The Kitco Gold Index attributed a $3.90 rise to predominant buying and the same drop to strength in the greenback, summing up to unchanged.

The U.S. Dollar Index ralled a fair amount to 79.4, but fizzled after double-topping at that level. Inching down to 79.2 as night turned into early morning, it climbed upwards to 79.5 before churning in a 79.4-5 range. That range turned into a descending triangle, and then to a drop below 79.2. As of 7:47 AM, the Index was at 79.15.

A Bloomberg report says gold may gain today because of haven demand; it also notes gold's run-up of 30% for last year.

“I’m bullish on gold this year because it is still mainly a haven play,” Park Jong Beom, a trader at Tong Yang Futures Trading Co. in Seoul, said by phone today. “The European debt crisis remains unresolved yet, and investors continue to favor it as a safe-haven asset.”

The overnight Reuters report notes that gold is on the move again, although hampered by a strengthening greenback.

Pradeep Unni, a senior analyst at Richcomm Global Services in Dubai, said fresh highs in gold were likely this year, with an initial target seen at $1,455-$1,480, after trade in the metal was becalmed over the Christmas holidays.

"The fundamentals are driving the price, and those fundamentals remain fear-driven," he said.

"Gold (steps) into the New Year with all its current fundamentals intact ... sovereign debt risk, macro uncertainty, concerns over currency stability, medium-term inflation fears as the U.S. Federal Reserve implements Quantitative Easing II, geopolitical tensions and low interest rates."

Also quoted is an MF Global report which said a stronger U.S. dollar isn't that bad for gold because it refects weakness in the Eurozone. The greenback rose on 6.5% last year while gold put on 30%.

An earlier Wall Street Journal article attributed gold's drop last night to greenback strength.

Gold's immediate prospects of breaking its record high of $1,431.30/oz, hit early last month, likely rest on significant U.S. economic data including December nonfarm payrolls due this week.

"Ahead of this key economic report that could show the U.S. economy gaining momentum, some investors may take profits in gold after the surprise runup in late December," Phillip Futures said.

The rally that began at 7:30 continued for a few dollars more, until it peaked at $1425.00 right around the pit session's start. Subsequently, the metal dove to a little below $1,218 before recovering a little. As of 8:42 AM ET, the spot price was $1,419.80 for a drop of $1.80 on the day. The Kitco Gold Index attributed a $1.80 gain to predominant buying and a $3.60 drop to the strengthening greenback. The U.S. Dollar Index, after taking a tumble to below 79.07, recovered and climbed back to 79.21 before holding steady at around 79.17.

Gold's start on the new year hasn't been all that good, but it's still close to its record high. The drop it suffered at the opening of the pit session may prove to be a blip.