GOLD PRICE NEWS – The gold price traded slightly weaker Wednesday, sliding $7.00 to $1,509.22 per ounce. Strength in the U.S. dollar weighed on the price of gold as well as the entire commodity complex. News of hotter than expected inflation figures out of China raised concerns that the nation’s policy makers would continue to tighten monetary policy – a development that would likely keep commodity prices in check. Oil prices dropped 1.5% to $102.30 per barrel while copper fell back under $4.00 to trade at $3.96 per pound. Silver, which has displayed considerable more volatility than the gold price, sank 2% to $37.75 per ounce.
The gold price inched higher on Tuesday amid escalating concerns over the sovereign debt crisis in Greece. The SPDR Gold Trust (GLD), a proxy for the gold price and the world’s largest gold exchange-traded fund, finished higher by $0.52 at $147.90 per share. With today’s advance, the gold price extended its year-to-date gain to 6.7%.
Silver continued to rebound alongside the gold price, finishing with a gain of $0.75, or 2.0%, at $38.55 per ounce. Since reaching a two-month low of $33.04 last week, the price of silver has now jumped 16.7%. Year-to-date, gold’s sister precious metal has now risen 24.6%.
Equities and cyclical commodities also fared well on Tuesday, as the S&P 500 climbed 0.8% to 1,357.16 – within 1% of its multi-year high. Crude oil added $1.33, or 1.3%, to $103.88 per barrel, while copper prices rose $0.03, or 0.6%, to $4.04 per pound. Investor complacency continued moving higher, as the CBOE Volatility Index (VIX), often cited as a measure of risk aversion, tumbled 7.3% to 15.91.
Long-time gold bull Marc Faber provided his latest thoughts on the price of gold and silver on Tuesday at the New York Hard Assets Investment Conference. Faber, editor of The Gloom, Boom & Doom Report, reiterated his bullish outlook on gold but made cautious comments on stocks and cyclical commodities. He argued that the recent growth in Chinese money supply, which has surpassed that of the U.S., increases the prospects for further interest rate increases in China. Tighter monetary policy will in turn pressure equities and the broader commodities complex, both of which have benefitted substantially from unprecedented levels of liquidity from central banks.
Faber pointed to recent excessive bullishness toward commodities as a key reason for his bearish outlook. “When everybody thinks alike, I become very defensive,” Faber continued. “I’m deferring any new purchases of the beneficiaries of the inflation trade, except for gold.” Faber did not provide a specific gold price target, however.
The gold price was also supported by a report from HSBC Global Research, which raised its average price forecast for the yellow metal. HSBC analyst Jim Steel wrote in a note to clients that the price of gold is “bound to rebound” and that the bull market in gold “remains essentially intact.”
HSBC lifted its 2011 gold price target to $1,525 from $1,450 and bumped its 2012 forecast to $1,500 from $1,300 per ounce. “Gold prices have retreated from record highs,” the firm noted in its report. “But they should remain buoyed by investor concerns about the global economy, geopolitical risks, high commodity prices, easy monetary policies, and fiscal profligacy.”
