Gold Lopes Sideways In Uncertain Trading, Tumbles On Payroll Report

After yesterday afternoon's fall, gold stayed in a $1,430-35 range for the entire overnight session. The usual trouble spots still ticked over, providing some support to the metal, but nothing captured the imagination of bulls or would-be bulls - not even WTI crude marching up to $107/bbl. Instead, the metal hugged the bottom of the range yesterday night and the top of the range this morning. As of 8:03, the spot price was $1,434.50 for a small gain of $2.70 on the day. The Kitco Gold Index attributed +$4.60 to predominant buying and -$1.90 to a strengthening greenback. As will be seen below, though, that listlessness changed abruptly after the 8:30 release of the nonfarm payrolls report.

The U.S. Dollar Index built on its earlier gains yesterday afternoon, but its climb was uneven and not that extensive. Descending to a little below 76.0 yesterday evening, it managed to briefly get up above 76.15 but instead got stuck in a range between that level and 76.05. As of 8:11, it was still moving sideways at 76.13.

A Bloomberg report said gold may climb as geopolitical troubles continue to stimulate demand for it as an alternative investment.

Gold is supported “on the back of expectations that the military intervention in Libya will prove to be a prolonged affair, coupled with the renewed concerns over the sovereign debt problems in Europe,” Marc Elliott, an analyst at Fairfax IS in London, said in a report.

Although Gadaffi's forces have gained the upper hand, the Coalition welcomed the defection of former Libyan Foriegn Minister Moussa Koussa. He hasn't been granted asylum in the U.K. The article also notes that sales of U.S. gold Eagles fell 21 percent to 73,500 ounces in March; that's the lowest level since December.

An earlier Reuters report said gold eased off last night due to uncertainty about the U.S. payroll-data report - particularly, if the report is optimistic enough to help spur a Fed rate hike.

"I am still positive about gold, but I think it will take time to consolidate. But there's not much going on, especially on the physical side and we are also waiting for the non-farm figure...," said Dick Poon, manager of precious metals at Heraeus in Hong Kong.

"The premiums are also stable at 90 cents to $1," said Poon, referring to premiums for gold bars.

Premiums in Singapore were also steady at 90 cents an ounce. Holdings of the SPDR Gold Shares Trust (GLD) declined by 0.61 tonnes yesterday to 1,211.23 tonnes. The article said declines were in part due to other ETFs, like oil-based ones, sucking money out of GLD.

A Wall Street Journal report said gold snuck upwards this morning ahead of the payroll reports, but intimated it was just fluctuating.

"There aren't a lot of people brave enough to make any big moves right now," said Afshin Nabavi, head of trading and physical sales at precious-metal trading house MKS Finance.

Although gold rose this quarter, making for its longest stretch of quarterly rises since 1979, this quarter's gain was only 0.6%. Had gold fell ten dollars more yesterday afternoon, the streak would have been broken.

The U.S. nonfarms payroll report for March showed a stronger-than-expected gain of 216,000 jobs; expectations were for 192,000. The unemployment rate notched down to 8.8%, but average earnings were flat for the month. So, the bad news from February isn't carrying over to the payrolls report. Reflecting the nervousness over it, gold tumbled at the time of its release. From a regular-trading open at around $1,435, got as low as $1,419.20 in a snap slide that was built on by panic selling. As of 8:45, the spot price was $1,421.90 for a drop of $9.90 on the day. The Kitco Gold Index split the loss into -$2.45 for predominant selling and -$7.45 for greenback strengthening. The U.S. Dollar Index loved the report, running up to 76.45 before running out of breath. As of 8:47, it was at 76.41.

Disappointment and the consequent panic selling suggests gold was held up by recent less-than-cheery data about the U.S. economy. That expectation, as well as my own for continued salubriousness, was confounded with the payrolls report, leading to an abrupt end to gold's earlier directionlessness. Despite the tumble, $1,420 held and there may be somewhat of a relief rally later today. Still, gold is likely to book a loss on the day due to that disappointment. Sad but likely true.