Gold Gets Respite After Plunging Yesterday

Despite both WTI crude oil and silver continuing to slide in early morning, gold got a break as it stayed largely above $1,480. After slumping a little in early evening, to below $1,475, the metal jumped up to almost $1,490 shortly after Sydney trading opened. After doing so, it stayed at that level - only sagging a little - until just after 3 AM ET. Then, it dropped to $1,480 and hung around there. Recovering to almost $1,490 at 5:00, it stayed in the high 1480s until slumping back to $1,480 between 7:00 and 8:00. Pushing it down at 3 AM was another tumble in oil that took a barrel from $99 to $95 before it recovered to $98. The push-down at 5 AM was prompted by silver, which fell from above $35 to below $34. Still, despite those push-downs, gold sported a gain on the day as regular trading came up. A recovery to the low 1480s just before regular trading added to the gain. As of 8:13, the spot price was $1,483.00 for a gain of $9.90 on the day. The Kitco Gold Index attributed +$12.70 to predominant buying and -$2.80 to a strengthening greenback.

The U.S. Dollar Index, after its run yesterday, held its own in the overnight session by staying in a range between 74.00 and 74.2. After slumping down to 74.00 in the evening, the Index bobbed around until it got enough traction to run up to 74.275 at 4:30. Frustrated at that level, it sunk back to its range but it had enough strength to stay on the high end. As of 8:21, it was bumping against 74.2 at 74.18.

A report from TheStreet.com said gold stayed steady despite silver continuing to plummet as the two metals diverged.

"Gold up, silver down is a very rare event -- less than 14% of all trading days since 1968," says Adrian Ash, head of research at BullionVault.com. Before this week it has happened only "two consecutive days ... 125 times and three consecutive days happening only once."...

"After the volatility seen this week and the pace of selloffs, particularly in silver, we could see the metals rise as end of week book squaring is seen," said James Moore, research analyst at FastMarkets.

Another analyst is quoted as being bearish because the gold stocks never followed gold up.

An earlier Reuters report said gold (and, at the time, silver) benefitted from bargain hunting.

"Prices have dropped so much over the past few days and bargain hunters are in," said Ong Yi Ling, an analyst at Phillip Futures, adding that the weak outlook for U.S. employment data helped add to the lure of gold....

"Gold is a better bet than silver or oil, as losses would be capped by its safe-haven status," said Ong...

Another quoted analyst suggested that gold was dragged down as part of a general revaluation of assets as the recovery is questioned. Holdings of the SPDR Gold Shares Trust dropped by 11.52 tonnes yesterday to 1,208.42 tonnes. That's less than 3 tonnes away from its 2011 low.

The nonfarm payrolls report was released at 8:30, and it showed a gain of 244,000 jobs in April. That gain was the largest in a year, and was well above expectations for a 175,000 gain. Average hourly earnings were almost unchanged, while the labour force shrank by 190,000. The unemployment rate rose to 9.0%. After sinking back to below $1,480 just before regular trading started, gold pulled up to $1,480 but tumbled to $1,475 when the report was released. The greenback liked the report, which got gold stumbling. But, the metal then more than reversed that tumble: it shot up to $1,485 before coming to rest around $1,480. Despite the volatility engendered by the payrolls report and the greenback's reaction to it, it was largely a wash. As of 8:42, the spot price was $1,479.90 for a gain of $6.80 on the day. The Kitco Gold Index assigned +$12.10's worth of change to predominant buying and -$5.30's worth to greenback strengthening. The U.S. Dollar Index jumped on the report: after its release, the Index leapt past the top of its range to 74.39 before pausing. As of 8:45, it had softened to 74.32.

After four days of mostly serious declines, gold got a respite this overnight session. Part of it was because of Indian buying to celebrate Akshaya Tritiya, but part of it was just plain relief. Just as gold couldn't rise forever, it couldn't fall forever. Today's regular session may see gold continue to move sideways, in part because silver has gotten a relief boost too.