Tuesday, March 22, 2011

Gold Slightly Down On ECB Hawkishness, Supported By Lower Greenback

The Coalition forces continue to bomb Gadaffi's forces. One pilot got into a little trouble when his plane crashed, but he was unhurt. In Yemen, President Ali Abdullah Saleh agreed to quit his office by the end of this year instead of 2013. Facing a mutiny does make for a more accomodative attitude.

In Europe, there's more and more expection for a rate hike as the European central bank becomes more hawkish. That tough talk, and possible action next month, helped move the Euro up even more against the greenback. Crude oil sunk a little, but WTI still remains above $102/bbl.

In the overnight-trading timeframe, gold rambled within the high 1420s with occasional and temporary breaks above $1,430 and one breakdown below $1,425. Ascending on continued Libyan troubles last night, it muddled around in early morning before leaping up to the morning high of $1,433.40. With the ECB's tough talk on inflation came a pullback, which got as low as $1,423.20 before it reversed. The metal still lost enthusiasm as it became clearer that the ECB is likely to raise its rate. As of 8:15, gold's spot price was $1,425.30 for a drop of $1.80 on the day. The Kitco Gold Index attributed -$3.80 for predominant selling and +$2.00 for a weakening greenback.

The U.S. Dollar Index, after an evening climb, ambled downwards with frequent secondary upturns along the way. Marking time at a little below 75.35 while gold spiked, it inched further downwards as regular trading approached. As of 8:20, it was rambling around at 75.29.

A Bloomberg report said gold fluctuated while a lower greenback and the Libyan war continued to encourage buying. Yemen is beginning to appear on the radar: despite his agreement to leave earlier, President Saleh is warning that the mutiny could lead to a bloody civil war. His words may be a disguised threat.
“Precious metals continue to benefit from uncertainty over the situation in Libya,” Marc Ground, an analyst at Standard Bank Plc in Johannesburg, said in a report. “A weaker dollar is also lending support. Any strong indications that Japan’s nuclear crisis might be coming to an end could see safe-haven demand come off slightly.”
As for the Fukushima Dai-Ichi nuclear plant, five kinds of radioactive materials have been found in the seawater near it. Although gold might well suffer from a capping of the damage, the damage has still been done.

A Reuters report said that the lower greenback supported the metal, but addressed the possibility of a decline.
"I wouldn't interpret too much into the moves of the last few moments, because volatility, not only in precious metals, but in all of the commodities is so extremely high at the moment," said Commerzbank analyst Daniel Briesemann.

"This volatility shows market participants are still very uncertain about what is going on and where it is leading, so at least in theory, it should be supportive for gold."

"There is still a very low interest-rate environment and there is so much liquidity out there, trying to find its way into the market and commodities are currently a very attractive asset class, so they will definitely profit from this," he said.
The article said some progress seems to be made in containing the damage done by the nuclear plant, as power is finally reaching some of the cooling system, but rising smoke and haze from the most dangerous reactor evinces that the situation is far from being resolved. Holding of the SPDR Gold Shares Trust abruptly reversed their last two days of gains, dropping 10.62 tonnes to 1,215.78 tonnes yesterday. The article ascribed that drop to profit-taking.

A Wall Street Journal article said gold held its own as traders watched the Japan and Middle East crises. The price of oil did stabilize overnight because there seems to be some progress in Japan.
Gold is, though, "still profiting from geopolitical tensions in North Africa and the Arab region," Commerzbank analysts said in a note to clients, as Western forces continue their U.N.-backed strikes on strongholds of Libyan leader Col. Moammar Gadhafi.
Near term, traders expect the metal to keep rambling but James Moore is quited as saying the current crises plus the lingering Eurocrisis are exected to ground any slides.

Again, there was no data on the U.S. economy in the 8:30 time slot. Although regular trading began with an advance, the metal slipped subsequently to $1420.90 before regaining its footing. As of 8:46, the spot price was $1,423.40 for a loss of $3.70 on the day. The Kitco Gold Index assigned -$4.70's worth of change to predominant selling and +$1.00's worth to greenback weakening. The U.S. Dollar Index, after ending its ramble, put pressure on the metal by rallying. As of 8:49, it had advanced to 75.36.

Gold's overall aimlessness did continue in the overnight session. Its foot-dragging suggests there'll be some volatility in regular trading today, with the multicrisis cushioning effect being given a test. Odds are that the metal will pass that test and keep meandering.

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