GOLD PRICE NEWS – The gold price climbed higher Tuesday, gaining $3.35 to $1,520.50 per ounce. The price of gold advanced on weakness in the U.S. dollar and on the back of a research report from Goldman Sachs recommending clients “buy” commodities. The U.S. dollar fell against the euro and pound, giving a boost to gold and silver, which rose to $35.89 per ounce – up 2.4% from yesterday’s close.
Gold has held up well in recent weeks despite the weakness that has been prevalent across the commodity complex. Steve Scacalossi, Head of Sales, Global Precious Metals at TD Securities, noted that “Gold has impressed in its resilience ignoring market activity elsewhere and in cross currency terms had another good session overnight making new historic highs in both EUR and GBP.”
European sovereign debt concerns dominated the headlines on Monday, helping push the U.S.-denominated gold price up to $1,515 and the euro gold price to a new record high of €1,080 per ounce. Silver did not fare as well as the gold price, but did manage to close with a fractional gain at $35.11 per ounce. Stability in the price of gold and silver came despite a rally in the U.S. dollar, largely on the back of weakness in the euro. The dollar’s rise put severe pressure on cyclical commodities as copper tumbled 3.2% to $3.99 per pound and oil slid 2.4% to $97.70 per barrel.
The strength displayed by precious metals was reminiscent of May 2010, when the gold price rallied alongside the U.S. dollar as the Greek debt crisis first escalated. The yellow metal’s ongoing resiliency is indicative of the extent to which investors around the world have come to view gold as a currency alternative rather than a commodity.
The ascent in the gold price was unable to boost gold equities on Monday, which succumbed to selling pressure alongside the broader market stocks. While the Dow Jones Industrial Average (DJIA) completed its worst two-session stretch in over two months with a 131 point, or 1.1% retreat, the AMEX Gold Bugs Index (HUI) fell 0.9% to 525.10. Shares of the world’s two largest gold companies, Barrick Gold (ABX) and Goldcorp (GG), posted losses of 0.2% and 0.4%, respectively. The share prices of gold mining producers moved higher this morning on the back of strength in the gold price.
Several key developments amongst members of the “PIIGS” contributed to strength in the gold price and weakness in the broader markets to open the week. Italy’s credit rating outlook was lowered by Standard & Poor’s, Spanish Prime Minister Jose Luis Rodriguez Zapatero’s Socialist party endured significant losses in regional elections amid a backlash over austerity measures, and Greek bond yields and credit default swaps surged to new all-time highs.
Rising concerns in Europe were coupled with disappointing economic data across the globe. In China, a preliminary reading of manufacturing activity dropped to 51.1, its lowest level since July 2010. Back in Europe, several key gauges of services and manufacturing growth slowed more than economists were expecting. As for the U.S., the Federal Reserve Bank of Chicago’s National Activity Index unexpectedly declined to negative territory.
European policy makers on Monday continued their attempts to reassure investors that the financial assistance plans to Greece and other PIIGS members are making progress. Greek Prime Minister George Papandreou stated that “We are taking the necessary decisions to avoid the danger and to change the country.”
Jean-Claude Juncker, Luxembourg’s Prime Minister and the president of the Euro Group, stated that “Greece is not broke…I am firmly convinced that, in a joint effort, we can lead Greece out of the crisis.”
However, with the euro plunging from over 1.49 just two weeks ago to its current level under 1.40, Greek 10-year yields hitting a fresh record above 17%, and the euro-denominated gold price reaching a new all-time high of €1,080 per ounce, financial markets suggest otherwise.
