GOLD PRICE NEWS - After trading back above $1,250 per ounce early Friday morning, the gold price resumed its minor correction that began yesterday. The gold price was lower by $4.70 to $1,239.50 on the heels of yesterday’s nearly 1% decline. The gold price traded within $6 of its $1,265 per ounce record high earlier this week, but failed to break out to the upside.
Shares of gold producers and explorers fell in concert with the gold price yesterday and are under pressure this morning. Barrick Gold (ABX), the world’s largest gold producer, and Newmont Mining (NEM), the only gold producer in the S&P 500, were both trading lower by roughly 1% heading into the open. ABX and NEM fell 2.7% and 2.2%, respectively, during yesterday’s trading session.
News announced late yesterday that the International Monetary Fund (IMF) sold 10 metric tons of gold to the Bangladesh Bank, the central bank of Bangladesh, gave a temporary boost to the gold price, but the momentum ended quickly. According to the IMF, “The sale was conducted on the basis of market prices prevailing on September 7, 2010 with proceeds equivalent to $403 million.”
“Whenever these things come out, they tend to be relatively supportive of the gold price,“ stated Darren Heathcote, head of trading at Investec Bank in Sydney. “It’s not huge. It will add more support to what is already a well-supported market.” Central banks have turned from net sellers to net buyers over the past two years in an effort to diversify their foreign exchange reserves away from both U.S. dollars and euros.
While the longer-term fundamentals underpinning the bull market in gold remain intact, worries over the possibility of a correction have escalated. One long-time bull on the gold price, veteran market commentator Richard Russell, urged short-term caution in his daily comment to subscribers. Russell noted that “Gold has been higher five weeks in a row. Gold is overbought, and the odds are that gold is ready to correct. I’ve been saying that gold is overdue to correct, but what I’m interested in is how far the correction might carry.” Despite being concerned that the gold price may be on the cusp of a correction in the near-term, Russell remains bullish longer-term, citing a Federal Reserve committed to sparking inflation at nearly any cost.
Egon von Greyerz, of Matterhorn Asset Management, disagrees with Russell’s short-term cautionary stance, noting that, “Fundamental and technical factors for gold are now in total harmony and gold is entering a virtuous circle that will drive the price up at its fastest pace since this bull market started in 1999.” Greyerz elaborated on his bullish posture on the gold price, stating “We expect gold to start a substantial rise now which will continue for 5-10 months before any major correction. Gold’s technical picture is extremely strong with a continuous rising pattern of higher highs and higher lows with the steepness of the curve increasing.” The outspoken Greyerz cites “unlimited money printing” as a chief reason for his gold price targets, which call for “gold anywhere from $6,000 to $10,000.”
