Gold Slumps Back As Pressure On Portugal Eases

The latest trouble spot in the Eurozone has cooled. The government of Portugal pulled off the selling of a new issue of ten-year notes at a lower yield than the previous issue went for. There's no need for a bailout (as of now.) In consequence, gold fell below $1,380 after pulling back earlier.

Last evening, the metal was somewhat stronger. It managed to pull up to the $1,385 level and stay there until 4 AM ET. The opening of the London market actually saw a jump, to gold's daily high of $1,388.10. Once 4:00 arrived, it sunk to about $1,382 before the news of the Portugal sale hit; in consequence, it dived down to a low of $1,377.40 and entered the loss column. As of 8:00 AM ET, the spot price was $1,379.50 for a drop of $1.80 on the day. The Kitco Gold Index attributed -$3.00 to predominant selling and +$1.20 for a weakening greenback.

The U.S. Dollar Index also fell, although it recovered somewhat later. A two-stage slump spanning last night and part of early this morning left the Index below 80.5 as of 4:40. The Portugal news saw a recovery of the greenback, but not to the level it was at yesterday; instead, it settled into a range between 80.75 and 80.85. As the times indicate, an initial drop (resulting from a rise in the Euro) changed into a rise. As of 8:19 AM, the Index was 80.77.

A Bloomberg report says gold could rise today as comments from Axel Weber of the European Central Bank set a tone that's good for the metal. In particular, the latter said the Eurocrisis is far from over.

“The Fed will most likely stay on its path of easy monetary policy for longer, rather than risk derailing the recovery with a return to policy normalization prematurely,” Edel Tully, an analyst at UBS AG in London, said in a report today. “Such an environment remains positive for gold, as does rising European debt concerns.”

The article also notes that a measure of recent job openings indicated shrinking.

A Wall Street Journal report also said that gold was little changed after the Portugal debt auction.

More broadly, the gold market is recovering losses from a new year slump last week, and "things are looking increasingly bullish," said Clive Lambert, director at technical analysts FuturesTechs.

He said the bulls have "seen off challenging resistance to put things back in their favor" and subsequently target a fresh test of $1,424.40/oz and $1,432.50/oz.

As it turned out, the above-mentioned optimism was justified. Just prior to the opening of regular trading, gold's decline reversed; the run-up continued as the pit session got rolling. As of 8:43 AM, the spot price has shifted to a $1.10 gain at $1,382.40. The Kitco Gold Index assigned -$2.20's worth of change to predominant selling and +$3.30's worth to greenback weakening. The U.S. Dollar Index broke through the bottom of its short-term range to reach 80.60 as of 8:47.

The news from Portugal only put a temporary block on gold's rise so far. It may slump later, but the metal's opening performance in the first eighteen minutes of regular trading indicates an underlying bullishness that hasn't been staunched by the latest good news for the Eurozone. Today may contain little surprise, which would be good all told.