Be that as it may, the greenback lost its gains and more in early morning trading: that tumble influenced gold's climb-back to $1,505. Although briefly poking above that level, the metal couldn't hold on; instead, it slipped back to the low 1500s and racked up a small loss. As of 8:16, the spot price was $1,503.30 for a decline of $4.10 on the day. The Kitco Gold Index attributed -$6.70 to predominant selling and +$2.60 to a weakening greenback.
As mentioned above, the U.S. Dollar Index first enjoyed a nice climb but tumbled later. After hovering around 74.00, it got its traction after a minor slip and climbed all the way up to 74.355 by 9 PM. Sinking back to 74.15-20, it tried for another climb at 2:15 but couldn't hold on. Instead, it tumbled for the next three hours until it reached as low as 73.77. Turning around, it hiked back but it couldn't clear 73.95. As of 8:24, it was stuck at 73.89.
A Reuters report, covering last night, focused on silver but said that the gold market is watching the upcoming Fed policy meeting closely. Traders will be scrutinizing Ben Bernanke's words during his first press conference. Large open interests at $1,500 and $1,520 should hold gold up for the nonce.
"The market will be watching out for any signs of what the Fed is going to do at the end of the second round of quantitative easing," said [Yingxi] Yu of Barclays.Holdings of the SPDR Gold Shares Trust were unchanged yesterday at 1,229.64 tonnes.
"If Bernanke remains dovish, as he has been, it will provide indication that monetary policy will not be tightened significantly in the second half, which is pretty favourable for precious metals."
A Wall Street Journal piece said that the decline was induced by profit-taking. Traders will keep a close eye on the Fed today and tomorrow.
Investors in gold and silver, which are considered a good store of value in low interest, high-liquidity environments, will pay particularly close attention to comments by Federal Reserve Chairman Ben Bernanke in his question-and-answer session with the media Wednesday.Uncertainties about the Fed's dovishness added to the weight on gold (and presumably helped the greenback.)
"The Fed meeting is in the market's consciousness today," said Tom Kendall, vice president of commodities research at Credit Suisse.
The metal took a bit of a slip as regular trading got underway, but its fall was halted at $1,503. The pit session's open saw it boosted up by a burst of buying, enough to get it up to $1,506, but it quieted down and settled around $1,505. As of 8:44, the spot price was $1,505.10 for a loss of $2.30 on the day. The Kitco Gold Index assigned -$6.40's worth of change to predominant selling and +$4.10's worth to greenback weakening. The U.S. Dollar Index stumbled after pausing around 73.9; as of 8:47, it had regained its footing at 73.83.
Although the overnight session did not show the continued strength I expected, the fall was overdue given gold's overboughtedness. If the Fed meeting shows the central bank sticking to its dovishness, gold should hold up. If not, $1,500 will be a memory. As a result of nervousness, today's regular trading should be choppy but inconclusive until we hear from the Fed.