Gold Keeps Rising As Euro Breaks Through US$1.45

The Euro managed to bust through $1.45. In so doing, it pushed the greenback down to a fresh 15-month low. That gave a needed boost to gold, pushing it up to a new record high of $1,510.10 just before 2 AM ET.

The metal started off the evening sliding back, but got enough traction at 8:00 to climb up to $1,508 after sinking to $1,500. That climb was contemporaneous with the greenback tumbling. Sliding back to $1,505 at midnight, gold climbed up to its new record high. Its momentum then lost, it slid down to its early-morning low of $1,503.00. Recovering, it then ambled up to around $1,507 and got stuck there for almost four hours before slipping. As of 8:09, the spot price was $1,505.70 for a gain of $3.70 on the day. The Kitco Gold Index attributed -$5.30 to predominant selling and +$9.00 for a weakening greenback.

The U.S. Dollar Index, because of the Euro's newfound strength, tumbled from 74.35 yesterday evening to around 74.1 last night. Getting stuck in a range between 74.05 and 74.15, it broke through the floor at 1:25 AM and slid down with some scrabbling recoveries that slowed its slide. Bottoming at 73.275 at 5:30, which made for a new thirty-one-month low, it reversed course with a recovery climb. As of 8:17, it was still climbing at 73.93.

A Bloomberg article said gold gained because of a weaker dollar and debt concerns. Interestingly, Grecian government bonds reached record yields as rumours swirled about a possible restructuring. Unlike last week, those rumours did not push down the Euro.

“The key element determining gold’s near-term direction right now is the U.S. dollar,” Edel Tully, an analyst at UBS AG in London, said today in a report to clients. “Sovereign debt concerns in U.S. and Europe along with inflation fears provide a good backdrop for gold.”

One of the reasons why the greenback fell is because of weaker economic numbers, fueling speculation that the Federal Reserve will not join other central banks in raising rates. Trading will likely be thin today as tomorrow is a statutory holiday.

An earlier Reuters report said gold gained strength by the greenback falling to what it described as a three-year low. (Close enough.) Also helping gold was a modest rise in oil.

"On the basis of everything that is going wrong -- a possible downgrade in the United States, the situation in Libya not getting any better, the general feeling about the global economic situation -- I think gold is going to go higher," said London-based ANZ Bank analyst Peter Hillyard.

"Gold isn't finished yet by a long shot."...

"We still expect dips to be viewed as buying opportunities, with gold and silver viewed favorably by investors seeking to hedge against inflation and debt jitters," said FastMarkets analyst James Moore.

As for silver, it's within shouting distance of a new record high. Missing the excitement, holdings of the SPDR Gold Shares Trust were unchanged yesterday at 1,230.25 tonnes.

A Wall Street Journal article gave essentially the same reasons for gold's rise, but paid more attention to silver.As for gold, the focus is on the greenback.

This focus will be key to gold's progress next week, as the Federal Open Market Committee holds its final official meeting before the scheduled end to the country's quantitative easing program in June. With the gold market focused so narrowly on currency sentiment and fiscal policy, any notably hawkish or dovish rhetoric by the Fed has the potential to move prices, [Edel Tully] said.

The initial jobless claims number, released at 8:30, fell 13,000 but remained above 400,000. The 403,000 number was above expectations for a drop to 390,000. Despite the worse-than-expected result, gold fell on the news as the greenback continues its relief climb. After sinking to $1,505 when regular trading started, the metal stumbled to below $1,503 when the report was released. Having done so, it paused before inching up. As of 8:44, the spot price was $1,503.30 for a gain of $1.30 on the day. The Kitco Gold Index assigned -$6.80's worth of change to predominant selling and +$8.10's worth to greenback weakening. The U.S. Dollar Index, after slipping on the jobless-claims news, recovered and managed to bull up to 73.95. As of 8:47, it was pausing at 73.94.

Despite the greenback's rout, gold gained only modestly in overnight trading. Its contrary reaction to the jobless-claims figure suggests that today's regular trading is going to be somewhat of a disappointment: the news was sold on, not bought. Even if gold does lag, trading is going to be thin as the early week winds up. Any volatility would have to be endorsed in next Monday's trading to be seen as indicative of a solid trend.