Gold Climbs Above $1,400 On Inflation, Mideast Worries

With the holiday today, gold trading is thin; days like these either see little price change or a lot of volatility. With respect to the overnight session, last night and this morning saw near-steady gains until gold topped out at $1,404.90. Climbing out of the gate, the metal hovered around $1,395 for four hours before resuming its climb at 2 AM ET. Again pausing, it then vaulted up above $1,400 before pulling back to that level. As of 8:04, the spot price was $1,400.30 for a gain of $11.20 since Friday's close. The Kitco Gold Index attributed +$13.00 to predominant buying and -$1.80 to a strengthening greenback.

The U.S. Dollar Index began the week with a bit of a down-dip, to below 77.55, but without any conviction. Lacking much conviction of the upside too, it advanced irregularly as pullbacks recurrently took away most of its gains. As of 8:08, it was at 77.70.

A Bloomberg report said tensions in Libya, the lastest Middle Eastern country to experience widespread protests, helped push gold up to the $1,400 level.

“The mix of Middle Eastern jitters and inflation concerns continues to create a favorable price environment for the precious metals, particularly gold and silver,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

“Gold, silver, platinum and palladium are all riding on investor interest against the backdrop of intensifying violence in the Middle East,” said Hwang Il Doo, Seoul-based senior trader with KEB Futures Co. [That unrest is itself aggravated by inflation - particularly in foodstuffs.] “I wouldn’t be surprised to see gold rising above $1,500 in the coming month.”

The article also notes that gold is currently sitting on its sixth gain day in a row.

A Reuters report also ascribed the gains to Mideast tensions.

"There is no doubt that the recent move higher across the precious metals reflects a degree of safe-haven buying as a result of the unrest in the Middle East," said Daniel Major, an analyst at RBS Global Banking & Markets.

"If (buying) is not through the exchange-traded funds or a clear change in the net long on Comex, it is most likely to be through the physical market -- coin and small bar buying, and I potentially wouldn't rule out larger purchases by high net worth individuals on the back of the unrest we're seeing," he added.

"That has clearly been a game-changer in the last couple of weeks for gold and silver after what was quite a lethargic start to the year in terms of identifiable investment demand in the exchange-traded funds."

Despite gold's gains, holdings of the SPDR Gold Shares Trust dropped Friday to 1,223.098 tonnes.

An earlier Wall Street Journal article said gold, and more so silver, are being pushed up by those tensions.

Gold's progress was more sedate but it remained well bid on trouble in Libya.

The suggestion that the country is on the verge of civil war from Saif al-Islam Gadhafi, the son of Libyan leader Moammar Gadhafi, was the major catalyst pushing oil prices up by over a dollar.

Today being a holiday, there's no U.S. economic news to move gold one way or the other. Gold reversed its slump to $1,400, adding a couple of dollars as it bounced off. As of 8:36, the spot price was $1,401.80 for a gain of $12.70 since Friday's close. The Kitco Gold Index assigned +$15.10's worth of change to predominant buying and -$2.40 to greenback strengthening. The U.S. Dollar Index continued lumbering up, albeit stickily; as of 8:39 AM, it was at 77.73.

Just as gold was pulled out of last year's doldrums by the Eurocrisis, this year's slump is being reversed by Middle East tensions. Gold is now within thirty dollars of its all-time high, and has put in quite a strong performance given its doldrums three weeks ago. If it makes a new record high this month, or even next month, it would have made a game-changing move.