Monday, May 16, 2011

Gold Stays Stuck In 1490s

Despite Eurozone inflation rising to 2.8% in April from March's 2.7%, gold largely languished in the 1490s as trading for the week began. Any rise that gold got out of the news took place because the Euro rose on the expectation of further tightening. That anticipation took away any enthusiasm for the news in the gold market. After beginning the week with a slump from $1,495 to $1,490, the metal stayed in the low 1490s until 3 AM ET. Then, it climbed to as high as $1,499.30 and stayed in the high 1490s for about two and a half hours. Slumping back to $1,490 again, it recovered again and climbed up to near where it closed at last Friday. As of 8:10, the spot price was $1,495.70 for a gain of $0.50 since Friday's close. The Kitco Gold Index attributed -$0.40 to predominant buying and +$0.90 to a weakening greenback.

The U.S. Dollar Index started the week off climbing, moving from 75.7 to 76.0 last night, but it fell back to 75.8 between 9:30 PM and 10:20. Lingering just above there until 2 AM, it fell further to just above 75.6 before reversing and climbing up to the high 75.8s Again thwarted, it fell back. As of 8:18, the Index was still dropping at 75.66.

A Bloomberg report said gold had a rough time because of uncertainty over a new bailout for the Grecian government and the possible repercussions if the package doesn't go through.
“There is still a lot to fret about here for an average investor who remains tense over debt troubles in the monetary union and will think twice about getting out of those gold longs in the near term,” VTB Capital analyst Andrey Kryuchenkov said in a report today.
A Bloomberg straw poll of sixteen investors, traders and analysts showed that eleven of them expected gold to decline this week. Holdings of exchange-traded products tracked by Bloomberg dropped 9.19 tonnes to 2,040.78 tonnes last Friday.

An earlier Reuters report said gold held steady despite silver sliding as Eurocrisis-related fears rose.
"Gold could reverse recent falls and stand above the support level of $1,500 over the next week, as safe-haven buying could resume on re-ignited euro zone sovereign debt concerns," said Natalie Robertson, commodities strategist at ANZ.
Holdings of the SPDR Gold Shares Trust declined 8.79 tonnes to a one-year low of 1192.25 tonnes.

A Wall Street Journal report said that a clouded macroeconomic picture kept gold essentially flat, as sell-offs met firm support at $1,490.
The precious metals weakened as the dollar strengthened in early trading, after news of the arrest of International Monetary Fund Chief Dominique Strauss-Kahn on sexual-assault charges. Concerns arose that progress toward easing Europe's sovereign-debt issues may be hampered as this key player in taming the European debt crisis battles to clear his name.
Andrey Kryuchenkov is quoted as saying he expects gold to stay range-bound.

The May reading of the Empire State Index, gauging the state of the economy in the New York area, dropped more than expected. From April's 21.7, May's number was 11.9; expectations were for a fall to 19.7. That data, released at 8:30, came in the middle of a sell-off that started with the pit session's open. From above $1,497, gold slid to $1,494 before getting traction again; the Empire State Index news didn't lift the spirits of the gold market. As of 8:43, the spot price was $1,495.40 for a rise of $0.20 since Friday's close. The Kitco Gold Index assigned -$1.15's worth of change to predominant selling and +$1.35's worth to greenback weakening. The U.S. Dollar Index stopped declining after reaching 75.6 and then muddled along. As of 8:46, it was rambling at 75.66.

Gold hasn't done much as the week gets rolling, but it's done fairly well as compared with silver. Still the appetite for gold is lacking and that may express itself in some downward volatility this regular session. The metal is still stuck below $1,500.

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