GOLD PRICE NEWS – The gold price declined Monday morning as global financial markets shifted from “risk on” to “risk off.” The price of gold fell $21.80 to $1,722 per ounce, sinking alongside both stocks and commodities. S&P 500 stock futures fell 15.70 to 1265.20 while oil and copper fell 1.5% and 3.2%, respectively. Gold’s sister precious metal fell 2.8% to $34.30 per ounce as measured by front month silver futures on the COMEX.
Last week, the gold price advanced $108.84 to $1,744.94 per ounce, its highest closing level since September 21. In doing so the price of gold delivered a weekly gain of 6.7%, the best weekly rise since a 10.9% climb from November 30 – December 4, 2009. The gold price also extended its monthly and year-to-date gains to 7.4% and 22.8%, respectively.
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Silver posted a substantial gain alongside the gold price last week, jumping $3.86, or 12.3% to $35.13 per ounce. Shares of precious metal companies rallied as well, with the Philadelphia Gold & Silver Index (XAU) soaring 12.5% to 207.98. Last week the world’s three largest gold mining companies by market capitalization– Barrick Gold (ABX), Goldcorp (GG) and Newmont Mining (NEM) – reported third quarter earnings from a period of new record gold prices. Investors reacted favorably to each company’s results, with shares of ABX, GG, and NEM rising 2.3%, 1.6%, and 3.7%, respectively, following their earnings releases.
Gold stocks also received a boost last week from considerable strength in the broader equity markets. The Dow Jones Industrial Average (DJIA) climbed 3.6% to reach its highest level since July 28th of this year. With its advance, the Dow is on pace for its largest-ever monthly point gain and best percentage gain since January 1987. Risk aversion declined substantially as well, with the CBOE Volatility Index (VIX) sliding to its lowest level since August 3, 2011.
CIBC World Markets analyst Barry Cooper downgraded shares of Newmont Mining (NEM) to “Sector Underperformer” this morning. Cooper noted that “Operationally the company is still struggling with several assets…We see declines in production in each of the next two years such that without a change in gold prices, we would expect retrenchment of the share price down to the upper $50s.” Cooper cited the world’s largest gold producer, Barrick Gold (ABX) as a preferred alternative to Newmont.
Equities have rebounded significantly following several months of sharp losses stemming from concerns over the euro zone sovereign debt crisis and a new recession in the U.S. Last week the gold price and broader markets surged higher after euro zone officials announced a more robust set of plans that involve recapitalizing European banks and leveraging the European Financial Stability Fund (EFSF) to provide additional financial aid to Greece and other debt-strapped nations. While details of the plans remain non-existent,, European policymakers have committed themselves to further money printing and currency debasement as their chief forms of ammunition.
Looking ahead to the coming week, there are numerous potential catalysts likely to impact the gold price. Along with the ongoing sovereign debt drama in Europe, the U.S. economic calendar is filled with several important reports. The Chicago Purchasing Managers’ Index, a key manufacturing gauge, is due out Monday morning, followed by the ISM Index, construction spending, and auto sales on Tuesday. The next Fed meeting will occur on Wednesday, with the Federal Open Market Committee (FOMC) announcement due at 2:15pm ET.
The remainder of the week is filled with several key data points on the U.S. jobs environment – including the ADP employment report on Wednesday, jobless claims on Thursday, and non-farm payrolls on Friday. If the reports come in ahead of expectations, the price of gold could come under pressure. Alternatively, if the reports disappoint, calls for a third round of quantitative easing (QE3) may increase and lead to higher gold prices.
