GOLD PRICE NEWS - The gold price climbed $6.87 to $1,223.12 Friday morning as the price of gold showed its resiliency in the face of the higher euro against the U.S. dollar. In recent months the gold price has moved in the opposite direction of the euro/dollar currency cross, as investors have sought out the safety of gold amid the sovereign debt crisis in Europe. This morning however, the euro looked to extend its winning streak to four against the greenback, as it rose 0.2% to 1.2126.
The gold price, on the other hand, looked to end its three day losing streak following this past Monday’s rise to a new all-time high of $1,252.00 per ounce for the spot price of gold. The SPDR Gold Trust (GLD), the largest gold ETF and a proxy for the gold price, rose $1.02, or 0.9%, to $120.00 per share in premarket activity. Overseas markets were mostly higher as equities built on yesterday’s 273 point rally in the Dow Jones Industrial Average (DJIA). The rally brought the Dow Jones back above the psychologically important 10,000 level on a closing basis for the first time in more than a week.
European stocks were boosted by a 8.1% rebound in shares of much-maligned British Petroleum (BP), which has seen its share price more than 50% over the past six weeks because of the Gulf of Mexico oil spill. The cost of insuring BP’s bonds fell from a record level, as credit-default swaps declined 34.5 basis points to 443.5, according to CMA Datavision. Banco Santander SA (STD), Spain’s largest lender, rallied 7.8% in Madrid following the company’s prediction of a “brilliant” outlook for earnings. Shared of STD have also been under significant pressure in recent weeks as the sovereign debt crisis has escalated across Europe.
U.S. equity market futures were modestly higher in overnight trading, but turned decidedly negative following the release of the May retail sales report. The gold price extended its gains, rising $9.93 to $1,226.19, after the report that sales at U.S. retailers unexpectedly fell in May by 1.2% - below the 0.2% rise expected by economists. The disappointing figure was the first monthly decline since September 2009.
The worse than expected retail sales data, combined with last week’s disappointing employment report, are the latest in a series of cautionary signs that the economic recovery is losing momentum. Moreover, this data provides the Federal Reserve with further evidence to maintain its easy monetary policies and substantiates the continued use of the “extended period” language used by Ben Bernanke and the Fed in its policy statements to refer to the importance of keeping interest rates near zero. Such an economic backdrop has been a driving factor in the gold price ascent in recent years, and it appears that this environment is likely to continue for quite some time.
