Tuesday, April 5, 2011

Gold Slumps In Morning After Rising In Evening

The People's Bank of China raised its rate, once again, by 0.25%. The metal rose slowly last night and early this morning, with only minor slip-backs impeding its progress. The U.S. dollar also rose in that timeframe, helped by a seemingly more hawkish stance by Ben Bernanke, but the metal didn't seem to care. Not until 2 AM ET, that is, when its rise turned into a slump. Peaking at $1,440.20 at that time, the metal entered a three-stage dive that extended from the late Hong Kong session to the early London one; it bottomed at $1,429.10 before snapping up to the low 1430s. The rate hike did influence the metal downwards. As of 8:16, the spot price had recovered a little to reach $1,433.70 for a drop of $0.80 on the day. The Kitco Gold Index attributed +$1.80 to predominant buying and -$2.60 to a strengthening greenback.

The U.S. Dollar Index, as indicated above, rose last night. From dawdling around 75.9, it climbed above 76.0 and hovered there early this morning despite two attempts at breaking above 76.1. As of 8:25, it has slipped a bit to reach 76.00.

A Wall Street Journal report said that gold did fall on the People's Bank of China rate hike, in a brief write-up on a day when silver stole gold's thunder. The article said that the rate hike had the effect of pushing the euro lower, which benefitted the greenback.

With no U.S. economic data released at 8:30, gold unexpectedly shot up when regular trading started. Spiking to $1,441 on a buying wave, which cascaded as the pit session opened, it slipped back and settled around the $1,435 area. Evidently, the pit traders thought that the earlier sell-off was unwarranted. As of 8:41, the spot price was $1,435.10 for a gain of $0.60 on the day. The Kitco Gold Index assigned +$1.75's worth of change to predominant buying and -$1.15's worth to greenback strengthening. The U.S. Dollar Index, perhaps influencing the buying wave, continued to slump as it fell back below 76.0. As of 8:43, it was at 75.96.

Although there wasn't much coverage today, silver taking the limelight, gold's action still shows that tightening news is still being shrugged off. Not bad for a largely dull overnight.

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