Tuesday, May 3, 2011

After Stumble, Gold Falls Into Lower Range

Gold took a spill right out of the evening gate to $1,540. After a compensatory jump, it double-bottomed just above $1,535. Although gold's fall was ahead of a climb in the greenback, the latter endorsed the former's action. The metal then entered a range bounded by $1,540 and $1,550. Its gyrations therein were influenced by the ups and down of the greenback, but those ups and downs weren't enough to get gold out of that range except briefly. As regular trading approached, though, the range temporarily gave way on the downside as the strength of the greenback dragged it down. A renewed tumble by silver also weighed down on gold. As of 8:09, the spot price was $1,538.50 for a drop of $7.10 on the day. The Kitco Gold Index split the loss into -$3.20 for predominant selling and -$3.90 for a strengthening greenback.

The U.S. Dollar Index didn't climb right off the bat, staying stuck around 73.0, but it did managed to climb to 73.15 and stay around there last night. A lunge up to 73.2 presaged a two-stage slide that paused around midnight but didn't let up until the Index was at 72.9. From 2 AM ET to 4:15, it reversed its drop to run up to 73.3. At that time WTI crude oil broke out of its overnight range and slipped to just above $112. Then slipping back to 73.15, the Index climbed and fell within an ascending triangle pattern that later broke down. As of 8:20, it was skidding a little at 73.21.

A Reuters report said gold was largely steady due to continued low interest rates and inflation concerns.
"Over the last few weeks gold has become overbought," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong, expecting the market to remain volatile in the near term.

The price level at $1,500 is seen as a strong support for gold, Fung added....

"The underlying facts supporting gold are still intact, such as the ultra-loose monetary policy of the U.S. Federal Reserve," said Ong Yi Ling, an analyst at Philip Futures.
Indian inflation prompted India's central bank to hike its rate by 50 basis points, but the Federal Reserve is expected to remain easy. Holdings of the SPDR Gold Shares Trust were unchanged yet again yesterday at 1,229.64 tonnes.

After falling through the range in the low side, the metal snapped back into it with a recovery run that started just before regular trading did. From a low of $1,537, the metal hoofed it up to $1,546 before pulling back. The rally seemed to have been prompted by bargain hunting. As of 8:42, the spot price had steadied at $1,545.00 for a much lesser drop of $0.60. The Kitco Gold Index attributed +$1.25 to predominant buying and -$1.85 to greenback strengthening. The U.S. Dollar Index continued slipping: its fallback had an influence on gold's snapback. As of 8:47, it was still skidding at 73.11.

So far, despite the lower range that prevailed during this last overnight session as compared with the one before, gold's managed to hold off from any more tumbles. Regular trading got off to a nice start, although it's unlikely that the first twenty-five minutes will prove to be an accurate forecaster. The greenback, although showing some strength, hasn't mustered enough to hammer down gold. Today's regular trading in the metal should be less volatile than Friday's.

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