Gold Holds Steady In Overnight Session

President Obama's State of the Union speech didn't have any effect on gold last night - but little did otherwise. The metal stayed near the top of its already-established $1,330-35 range from the start of overnight trading, and continued there until just after 2 AM ET. Blipping up above $1,335, it stayed up until a little after 7 AM and then fell back down into the range. All in all, the metal held steady - but the early-morning hex was broken. As of 8:03 AM ET, the spot price was $1,331.20 for a drop of $1.60 on the day. The Kitco Gold Index attributed -$3.10 to predominant selling and +$1.50 to a weakening greenback.

The U.S. Dollar Index made two attempts to rally above 78 overnight; both failed. The overall trend was downwards, but only slightly so. 77.75 proved to be a support level, making for a bottom between 4 AM and 7:30. As of 8:24, the Index was at 77.86.

A Reuters report ascribes the steadiness to the gold market waiting on the conclusion of the Federal Reserve's two-day meeting. Strong physical demand in Asia counteracted wilting investment demand.

"People like to liquidate their gold investment to move to markets other than metals," said a Hong Kong-based dealer, adding that even though robust physical demand remained supportive, the price trend looked bearish.

"Prices will likely test $1,320 again, and upside pressure is still a bit heavy."

The supply tightness in the physical market is expected to ease as the Lunar New Year holiday arrives, traders said.

As an example of shrinking investment demand, the article notes that the holdings of the SPDR Gold Shares Trust (GLD) shrunk by the most in its history over one day; the fund lost 31.262 tonnes yesterday.

A more recent Wall Street Journal article uses the same reason to explain the steadiness.

Standard Bank analyst Marc Ground said investment demand for gold and silver is starting to wane, and the support the metals enjoy from ample global liquidity and low long-term real interest rates is starting to be outgunned by the generally lower levels of risk aversion.

He said that "while global monetary conditions still favor gold and silver, on relative terms these metals appear overvalued. With much stronger fundamentals, platinum and palladium could outperform."

The article quotes another analyst, who said that monetary and fiscal policies still favour gold over the longer term.

Gold's steadiness continued into the opening of the pit session, when a blip-up was erased; the metal stayed in the low 1330s. As of 8:46, the spot price was $1,331.50 for a drop of $1.30 on the day. The Kitco Gold Index assigned -$1.60's worth of change to predominant selling and +$0.30's worth to greenback strengthening. The U.S. Dollar Index continued to trundle upwards, albeit slowly; as of 8:50, it was at 77.88.

The rest the metal is taking isn't that bad, as it's replaced steady declines that have halted. Gold's $1,325 floor is still solid, and will be so unless there's a surprise from the Fed meeting.