Gold Edges Below $1,330, Bounces Back

It wasn't a decisive penetration, but gold sagged below $1,330 in early-morning trading. Hovering around $1,335 last night, the metal sunk below $1,330 when night turned into morning. After hovering in the high 1320s, it made a try at getting back to $1,335 but couldn't do so. After 7 AM ET, it sagged back again to below $1,330. As of 8:12, the spot price was $1,328.40 for a drop of $6.60 on the day. The Kitco Gold Index split the loss into -$2.30 for predominant selling and -$4.30 for strengthening of the greenback.

The U.S. Dollar Index not only stayed above 77 but also shook off a decline to rise well above 77.3. Advancing to 77.2 last night, that advance turned into a retreat which stopped at about 77 as of 2:450 AM. That point marked a new advance that pulled the greenback up steadily. As of 8:17, the Index was at 77.38.

A Reuters report ascribed the slump to the recovery trade etching away fear.

Concerns over the fallout from unrest in Egypt, where six people were killed after supporters of president Hosni Mubarak opened fire on protestors overnight, have underpinned prices, but have not sparked fresh investment, analysts said.

"Since the sell-off across the commodity complex in early January, oil and industrial metals have rallied but the precious metals have been the laggards," said RBS analyst Daniel Major. "That is due to a combination of better economic data (and) less need for safe havens."

"Whilst the Egyptian events have clearly had some kind of risk-negative impact on equity markets and the broader commodities complex, I don't think it has been sufficient to drive investors in Europe and the United States into gold."

The article also quotes Edel Tully as saying the ECB will continue to be hawkish, and notes that Asian buying has been crimped by the Chinese Lunar New Year.

A Wall Stret Journal article said gold has softened in trading that's directionless overall.

Market speculation that China — where the markets are closed until Feb. 8 — has buyers still looking for deliveries for its new year is also providing some positivity following a general souring of investor sentiment this year.

"China is one of the most bullish factors in the current gold market," UBS analyst Edel Tully said. In a note to clients Thursday, though, she warned the yellow metal is in "no man's land right now," with investors struggling to make up their minds about the market's next direction.

Ms. Tully added that the current indecisiveness isn't that bad considering what January was like.

The weekly initial jobless-claims number continued a recent spate of volatility, dropping 42,000 to 415,000 for last week. U.S. business productivity rose 2.6% in the fourth quarter, with real output growing 4.5% and hours worked increasing by 1.8%. Despite the recovery-trade overhang, the gold market evidently liked the data. Regular trading began with the metal at $1,327, the point at which a jump-up started that carried it up above $1,335. More than half of the gain took place after 8:30 despite a short drop at that hour. As of 8:41, the spot price was $1,336.30 for a gain of $1,30 on the day. The Kitco Gold Index attributed +$8.50 to predominant buying and -$7.20 to greenback strengthening. The U.S. Dollar Index continued its rise, jumping up to almost 77.5 on the data. As of 8:45, it had risen a little more to reach 77.52.

All told, gold's continuing in the line established just before last week's plummet and restored afterwards. It hasn't been ignited that much by the Egyptian turmoil, but its downturn has been halted by that event. As its firming continues, the risk of a further plummet recedes.