Gold Enjoys Respite, Inches Above $1,400 In Slow Recovery

So far, a sequel to yesterday's plummet hasn't dogged gold. The Japanese nuclear crisis continues, with a fire in the power plant and increased radiation. Japan's Emperor Akihito has spoken up, expressing deep concern about the disaster. Public appearances on his part are rare, indicating how seriously he takes the crisis.

Over in Europe, 12-month inflation for February ticked up to 2.4% from January's 2.3%. For the month of February itself, consumer prices rose 0.4%. A lot of the rise was due to food and oil; the 12-month core rate declined slightly from 1.1% to 1.0%. But, labour costs rose 1.6% in the same period.

Gold took the news lightly, rising slightly after its release. The entire overnight session saw it ramble in the high 1390s until poking above $1,400 just before London opened. Meandering after that open, it stayed around $1,400 with little to motivate it up or down. As of 8:06, the spot price was $1,402.10 for a fairly decent gain of $6.40 on the day. The Kitco Gold Index attributed +$9.50 to predominant buying and -$3.10 to a strengthening greenback.

The U.S. Dollar Index, moving in line with gold this session, crawled up too. Rising yesterday evening, it bumped against 76.5 several times before temporarily giving up. Falling to a little above 76.3, it turned around and slowly rallied on the Eurozone inflation news. Once that news was out, the Index managed to break above 76.5 but not 76.6. As of 8:11, it had slid back to 76.50.

A Bloomberg report says gold climbed over concerns about Bahrain and continued worries about Japan. Yesterday, the king of Bahrain declared a state of emergency and imposed martial law for three months.

“There was a lot of panic-selling yesterday as people wanted to raise cash and there’s concern that yesterday’s selling was a bit overdone,” said Walter de Wet, an analyst at Standard Bank Plc in London. “If you’re looking at the safe haven side, the Middle East and North Africa region dominates,” while the crisis in Japan may also support prices, he said.

Another analyst is quoted as saying that geopolitical tensions are going to determine the fate of gold. The metal's rout was part of a downdraft that saw the Standard & Poor’s GSCI Index of 24 commodity futures plummet by 3.8% yesterday.

A Reuters report ascribed gold's mild recovery to bargain hunting and markets firming up after yesterday's rout.

"Gold may recover and stabilise, but there could be more downward pressure," said Quantitative Commodity Research consultant Peter Fertig. "It all depends on how tactical people are in managing the situation at the Fukushima nuclear power plant.

"It is currently all eyes on Japan, but also have an eye on the situation in the Middle East, which has been eclipsed by the developments in Japan," he added.

Libya might not be that good for gold now: Gadaffi's forces are pressing in to the rebel stronghold city of Benghazi. Holdings of the SPDR Gold Shares Trust declined by 0.91 tonnes yesterday, to 1,212.74 tonnes.

A Wall Street Journal report characterized overnight gains as a relief rally.

"We are looking for a little bit more in this rally," a London-based precious metals trader said. "The problem is I think it may be well sold into. Serious damage was done [Tuesday] and although longer term, we are still in a bull market, short-term the uptrend is broken."

Uncertainty over the Japan nuclear crisis continues to weigh, considering what happened to gold yesterday. The same trader is cited as saying he hasn't seen much bargain hunting so far. There wasn't a surge in physical demand overnight either.

Just before regular trading opened, gold inched up; after the pit session started, it stayed in place. The 8:30 slot showed February housing starts plummeting by 22.5%, which erased a big gain for January. The 479,000 annualized figure was way below expectations for 570,000. All in all, it was a deeply disappointing report. Despite the disappointment, gold hardly reacted: it stayed within a $1,403-4 band after the news was released, with a slight droop later. As of 8:42, the spot price was $1,402.80 for a gain of $7.10 on the day. The Kitco Gold Index assigned +$8.80's worth of change to predominant buying and -$1.70's worth to greenback strengthening. The U.S. Dollar Index continued backtracking; as of 8:45, it was at 76.42.

So far, the gold market seems to be in shock. Events both bad and good that normally move it, aren't. This numbness may continue in regular trading today, but gold has a good chance of ending up with a gain at the end of regular trading. That end would be better than the post-plummet norm.