Friday, April 29, 2011

Gold Marks Royal Wedding With Another New Record

Would that it were so, but gold marched up to a new record high on quotidian reasons. Like during the last overnight session, the metal hardly moved last night. Sagging a little to the low 1530s, it moved sideways as night turned into morning. After slumping gently to $1,532, it recovered and then broke to a new record on the news that Eurozone inflation for April moved from March's 2.7% to 2.8%. Unemployment for the region stayed steady at 9.9%. European Central Bank President Jean-Claude Trichet was cagey about the news, not chivvying the Bank to any imminent rate increases. WTI crude oil also jumped a bit as the greenback sunk. Gold's new record high is $1,541.00, which it reached just before 8 AM ET. As of 8:08, the spot price was slightly below that record at $1,539.50 for a gain on $3.70 on the day. The Kitco Gold Index attributed -$1.10 to predominant selling and +$4.80 to a weakening of the greenback.

The U.S. Dollar Index, after starting the overnight session around 73.1, first sunk but rose to 73.2 a little after 9 PM. Then thwarted, it sunk back to below 73.1 and then very slowly descended - until 4:20, when its decline accelerated after it broke through 73.05. Pausing at 72.95, it stumbled some more but recovered after sinking below 72.85. Although it was close, it did not make a new thirty-one month low. As of 8:13, it clambered back to reach 72.89.

A Reuters report said that gold was on track for its seventh weekly gain largely because of the slumping greenback.
Gold's inverse orrelation to the U.S. dollar makes it cheaper for non-U.S. investors and means it draws more strength from weakness in the greenback. Highlighting gold's dependence on the dollar is the tepid performance of the metal versus other major currencies such as the euro, against which it has barely moved this week.
Holdings of the SPDR Gold Shares Trust were unchanged again yesterday at 1,229.64 tonnes.

A Bloomberg report also credited the falling greenback.
“The sinking dollar is driving people to the gold market,” said Lim Han Jo, a Seoul-based trader with Tongyang Futures Co.
Bloomberg's weekly straw poll of 21 traders, investors and analysts had eighteen predicting a higher price for next week. Three predicted a lower price.

Consumer spending firmed up for March, and was revised higher for January and February. In nominal terms, spending rose 0.6% which roughly matched expectations. Feruary's was revised up to a 0.9% nominal gain and January's was revised to 0.5% from 0.3%. Personal incomes rose more highly than expected. After inching up to a new record high of $1,541.70 before regular trading started, gold slumped to the high 1530s again and took a two-and-one-half dollar dive on the news. As of 8:43, the spot price had recovered a little to $1,538.60 for a gain of $2.80 on the day. The Kitco Gold Index assigned -$1.20's worth of change to predominant selling and +$4.00's worth to greenback weakening. The U.S. Dollar Index continued to recover from its early-morning nadir: as of 8:45, it had stalled at 72.93.

Gold just keeps going up, although it's been unusually steady for most of the overnight session. What's absent is any sustained downturn. There may be some volatility in today's regular trading, as there was in yesterday's, but it looks like no major damage will be done unless the greenback turns up.

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