GOLD PRICE NEWS – The gold price stabilized near $1,538 per ounce Thursday morning after the European Central Bank (ECB) left its benchmark interest rate unchanged at 1.25%. While the gold price held firm, the euro slid 0.7% to 1.4485 against the U.S. dollar despite the fact that ECB President Jean-Claude Trichet signaled that an interest rate hike at the ECB’s July meeting is likely.
Yesterday saw the gold price fall $8.46, or 0.6%, to $1,536.31 per ounce after Fed Chairman Bernanke made no mention of a third round of quantitative easing in his discussion on the U.S. economic outlook. Despite the gold price sell-off, the yellow metal held within the $1,535 – $1,545 range it has now occupied for nine consecutive trading sessions.
Silver underperformed the gold price, dropping $0.47, or 1.3%, to $36.67 per ounce. Oil was the lone bright spot in the commodities complex, rallying 1.9% to $100.95 per barrel after OPEC unexpectedly decided to not raise its production levels at its meeting in Vienna, Austria.
Shares of gold and silver companies retreated alongside precious metals, with the Philadelphia Gold & Silver Index (XAU) sliding 2.1% to 194.11. The sell-off brought the XAU to its lowest level since September 2010 and extended its year-to-date loss to 14.3%. Notable gold shares posting losses on Wednesday included Gold Fields (GFI), Goldcorp (GG), and Royal Gold (RGLD). GFI, GG, and RGLD finished lower by 2.4%, 2.0%, and 1.9%, respectively.
Commenting on the weakness in the price of gold, analysts at ICICI Bank wrote in a note to clients that “Gold prices were largely governed by the movements in the dollar.” The firm attributed strength in the U.S. dollar to Bernanke’s speech, in which the Fed Chairman did not signal that any additional rounds of money printing are forthcoming.
On Wednesday, the release of the Federal Reserve’s Beige Book echoed Bernanke’s view that the economy continues to recover at a moderate but unsatisfactory pace. “Reports from the twelve Federal Reserve Districts indicated that economic activity generally continued to expand since the last report, though a few Districts indicated some deceleration,” the Fed noted.
The Beige Book pointed to ongoing weakness in the residential and commercial real estate markets across all districts. On the positive side, consumer spending showed “steady to modestly increasing activity,” while labor market conditions continued to show gradual improvement.
Following Bernanke’s speech and the release of the Beige Book, legendary investor Jim Rogers provided his latest thoughts on the broader economy and Federal Reserve. In an interview with CNBC, Rogers reiterated his disdain for the monetary policies of the U.S. central bank, and for Bernanke in particular.
“He’s (Bernanke) never been right about anything,” Rogers claimed. “He doesn’t understand finance. He doesn’t understand economics.”
Rogers contended that the only policy response the Fed ever enacts is the printing of money in an effort to stimulate the economy. However, the world is beginning to wake up to the severe unintended consequences of the Fed’s policies, which include rampant currency debasement and inflation. The rising price of gold is a strong indication of this trend.
While QE3 may not be in the immediate future, Rogers contended that if the economy spirals downward ahead of the 2012 Presidential election, Bernanke will choose to re-ignite the printing presses.
Rogers – best known for founding the Quantum Fund with George Soros and for his bullish call on commodities over the past decade – once again expressed his positive stance on many hard assets. The long-term outlook for the price of gold, silver, rice, and many other commodities remains particularly favorable, Rogers asserted, because of booming demand and declining supplies across the globe. Alternatively, if the global economy slows down, Rogers argued that central banks are likely to respond by printing even more money.
Lastly, Rogers provided some advice for those watching the interview: “Pick up the phone and buy some gold,” he asserted. Hopefully investors were paying attention.
