Monday, May 30, 2011

Gold Dawdles Around $1,535

The beginning of the week saw gold hardly moving. Sliding gently down to $1,535 last night, it stuck around that level all morning before slowly climbing at 5 AM ET. WTI crude oil fell a little bit, touching $100 after sinking to as low as $99.75. Silver also fell, subsequent to a jump last evening. Both of those other commodities were influenced by a recovery in the greenback, which affected gold little. As of 8:08, the spot price was $1,536.40 for a loss of $0.10 since Friday's close. The Kitco Gold Index attributed +$3.30 to predominant buying and -$3.40 to a strengthening greenback.

The U.S. Dollar Index climbed to 74.9 yesterday evening, a level at which it hung around until midnight. Then climbing further, it touched 75.0 before sliding down. From 2:15 to 4:40, it slipped from 75.02 to 74.85. Fluctuating in a range subsequently, centered at 79.88, it marked time until jumping up after 8:05. As of 8:16, it had reached 74.95.

A Bloomberg report said gold may continue to rally on fears of accelerating inflation and worries over Greece. Gold hit a record high in renminbi terms. Even though he didn't win support from opposition parties, Greece's Prime Minister George Papandreou said he'll try to enact new austerity measures.There's still worries that the Grecian government will not be able to pay its debts.
“Gold’s uptrend remains in place, with people being fidgety about Europe’s debt crisis,” said Chae Un Soo, Seoul- based trader with KEB Futures Co. “The metal is going to approach a record this week where it also could face heavy sell- offs to moderate rapid gains in prices.”
Seventeen out of nineteen participants in a Bloomberg straw poll of traders, analysts and investors said gold will rise this week.

A Reuters said gold was buoyed by the simmering Eurocrisis while gains were held in check by a decision of the Shanghai Gold Exchange to increase margins.
"The margin hike in Shanghai Gold Exchange is adding pressure to prices," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong....

Fung said $1,500 should offer strong support to gold, and prices are likely to reach $1,600 by the end of the year as investors continue to buy bullion to protect themselves against economic uncertainties, a view echoed by other market players.

"The speculators are coming back, mainly driven by the European debt crisis," said a Singapore-based trader. "Gold is likely to slowly move up during the summer unless we see big headlines, such as the U.S. raising interest rates earlier than expected."
European Union officials are expected to pronounce a verdict on the Grecian government's attempts to bring its budget under control. Holdings of the SPDR Gold Shares Trust shrunk 0.91 tonnes last Friday to 1,213.17 tonnes.

An earlier Wall Street Journal report said gold sunk slightly in Asia as the market awaits a slew of U.S. economic data this week.
Greek leaders Friday failed to reach a consensus on a plan to manage the country's economic crisis, heightening worries about the ability of the European Union to deal with member-countries' sovereign debt.

A weaker euro, which analysts said is a possibility early in the week, could weigh on the markets.

Commodity markets remain "at the mercy of what's happening in the currency markets," IG Markets institutional dealer Chris Weston said. He expects the yellow metal to touch $1,600/oz before the end of 2011.
Since recent data have been largely disappointing, there's an expectation for futher misses in the week ahead.

The U.S. is celebrating Memorial Day today, and the U.K. has a bank holiday, so the markets are closed. Gold, at the time when the pit session would normally open, shifted around between $1,536 and $1,537.50 before coming to a rest in the higher half of that range. As of 8:25, the spot price was $1,537.20 for a gain of $0.70 on the day. The Kitco Gold Index assigned +$4.50's worth of change to predominant buying and -$3.80's worth of change to greenback strengthening. The U.S. Dollar Index, still trading, stayed stuck just below 75.95. As of 8:46, it was still stuck at 74.94.

The overnight session didn't see a resumption of gold's upward climb, but the metal did hold its own. Once trading resumes, gold is likely to keep dithering as more clarity on the U.S. economy and Grecian sovereign debt is sought. The latest word on the latter is: the European Union is seeking a stricter new bailout, which would authorize intenational intervention in tax collection as well as privatizing government-owned assets. More austerity measues would be included too.

If you're celebrating a holiday today, enjoy the break for all it's worth. Happy Memorial Day to Americans: at the very least, the American government doesn't have to have its financed pawed by outside parties.

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