Gold Jumps Out Of Gate, Hits New Record Again

After closing with a gain in Hong Kong last Friday, gold managed another record high after jumping out of the gate in overnight trading. Jumping above $1,510 at the outset, it was pushed up by comments from high mainland Chinese officials to the effect that the People's Republic needs to cut its holdings of U.S. dollars from more than $3 trillion to about $1 trillion. The metal continued rising until it touched $1,514 just before 8 PM ET. Then pulling back, it still stayed above $1,510. As night turned into morning, it rose again before settling in to the high 1510s. The new record high of $1,519.30 was made at 4:00. Continuing in a range between $1,516 and $1,519, it abruptly fell down to $1,512 around 7:45 after double-topping just below the record. A recovery in the greenback provided the catalyst for the tumble. As of 8:13, the spot price had recovered a little to reach $1,514.00 for a gain of $9.30 since Friday's early close. The Kitco Gold Index split the gain into +$6.30 for predominant buying and +$3.00 for a weakening greenback.

The U.S. Dollar Index, despite that news from mainland China, started off the week by climbing a little. Reaching 74.1 from its start-off point of 74.05, it fell out of bed just after 6 PM and thus gave a boost to gold. Bottoming at 73.95, it shot up to 74.25 between 9:00 and 10:15. It was at that point when it began to lost ground and slide for most of the morning. Troughing at 73.8, it managed a quick recovery that induced gold's stumble. As of 8:20, it recovery fizzled: after peaking at 73.95, it had slipped to 73.92.

Silver rose more than gold, and came close to besting its 1980 record, so it garnered the attention normally accorded to gold. A Reuters report, devoted mainly to silver, quoted a gold trader as saying that gold is rising on the "'dollar play.'" Holdings of the SPDR Gold Shares Trust dropped 0.61 tonnes last Thursday to 1,229.64 tonnes.

An earlier Bloomberg report, covering last night's jump, said gold rose because investors were seeking protection from a weaker greenback and higher inflation; Middle East tensions also played a role.

“We do look at quite quick appreciation of gold in the coming months and it’s really driven by dollar weakness,” Dominic Schnider, director for wealth management research at UBS AG, said in a Bloomberg Television interview today.

WTI crude oil topped $113 for a time on the risk that violence in the Middle East - North Africa region will disrupt supplies.

A Wall Street Journal article, focusing on silver, mentions the mainland Chinese foreign-exchange-reserve connection:

Metals prices climbed as a Chinese news website reported that "relevant authorities" are studying a proposal by the People's Bank of China to create funds using some of the foreign-currency assets from the PBOC's balance sheet that could invest in sectors such as energy and precious metals, as well as a fund that will allow the central bank to influence exchange rates.

Tbe plan is to set up a sovereign-wealth fund like the Norwegian "Petroleum Fund."

With no news on the U.S. economy to influence it, gold gave up more of its gains after recovering to $1,515. The start of the pit session saw it tumble further, to below $1,511, before it managed a small relief climb. As of 8:42, the spot price was $1,512.40 for a gain of $7.70 since Friday's close. The Kitco Gold Index divided the gain into +$5.30 for predominant buying and +$2.40 for greenback weakening. After itself weakening, the U.S. Dollar Index regained its footing and strode above 73.95. As of 8:45, it was still climbing at 73.99.

Despite gold's bobble just before and right after regular trading started, it still made a strong showing as the last week of April begins. $1,500 has been cleared to the extent that $1,510 is providing support. Although silver is stealing the thunder, it approching its first new record high since 1980's short-lived spike, gold is climbing too. For perspective's sake: gold has to put on only two hundred more dollars per ounce before it doubles its own 1980 top. The excitement may fade during the rest of regular trading, but the proposal for a new mainland Chinese sovereign wealth fund had given gold enough of a cushion to make an overall gain likely.