Gold Inches Up, Bumps Against $1,380

Gold started the overnight session by crawling up to the high 1370s, but was stopped at the 1380 level early this morning. It briefly got above $1380, but soon pulled back to the high 1370s. All in all, it spent the morning part of overnight in a narrow trading range. As of 8:11, the spot price was $1,379.30 for a gain of $3.70 on the day. The Kitco Gold Index split the gain into +$2.70 due to predominant buying and +$1.00 due to a weakening greenback.

The U.S. Dollar Index resumed sinking last evening, getting all the way down to a little below 78.05, but reversed itself through a rally up to 78.35 that was interrupted by a major stumble late in the uptrend. Afterwards, it settled into a range between that level and 78.15. As of 8:16, it was at 78.21.

A Bloomberg report said gold climbed on speculation that inflation will keep rising and on hopes that Indian demand will recover.

Gold has benefited from an “an alarming U.K. CPI print,” UBS analyst Edel Tully said in the report. “Expectations of last year’s import duty hike caused our physical sales to India to accelerate about three days before the budget.”

The article also mentions the World Gold Council's finding that Indian and Chinese jewelry consumption rose to a record in 2010. On the other hand, assets held by ten gold ETFs tracked by Bloomberg declined slightly yesterday.

A Reuters report ascribed gold's uptick to rising safe-haven demand prompted by Mideast turmoil and a softer greenback.

"The market is very jittery because you have civil unrest across the entire Middle East," said VTB Capital analyst Andrey Kryuchenkov.

"The momentum is bullish, the uptrend is intact and there probably is some inflation buying ... but today the key is the inflation data," he said.

Although Asian demand was robust last year, it was still muted last night. Acclimatization to higer prices has not set in. Premoums for 1 kg bars in Singpore fell to below $2/oz.

The weekly initial jobless claims number for the U.S. economy climbed back up above 400,000 to 410,000, slightly above expectations. Of more import was the monthly consumer-price index number for January, which showed a 0.4% gain and a 0.2% rise in the core rate. Both figures were 0.1% above respective expectations. Although both items would be expected to push gold up, the metal didn't react all that much to the releases initially. Bobbing around $1,380, it initially fell but then rose slightly above that ceiling. As of 8:43, the spot price was $1,380.50 for a gain of $4.90 on the day. The Kitco Gold Index divided the gain into +$2.60 for predominant buying and +$2.30 for greenback weakening. The U.S. Dollar Index, after pre-rallying a little, was taken by surprise and slumped to below its earlier range. As of 8:45, it was at 78.08.

Gold tired overnight, being thwarted by the $1,380 resistance level, but it still rose all told. Its quiet gains show that the bullish impulse is still there despite lack of acclimatization in Asian markets. The key question for today is, can gold get up above $1,380 and stay up? The answer will come when regular trading winds up today.