Gold Price Hovers Under Record Hig

GOLD PRICE NEWS – The gold price bounced back toward $1,440 per ounce, gaining $5.10 to $1,435.50 per ounce Friday morning.  Gold prices showed a muted response to news that U.S. gross domestic product rose 3.1% in the fourth quarter, 0.1% ahead of market expectations.  The bulk of the commodity complex traded near unchanged as oil and copper hovered near $105.50 per barrel and $4.43 per pound, respectively.  Silver rose 1% to $37.52 per ounce.

The share prices of gold mining producers and explorers moved marginally higher in pre-market activity.  Barrick Gold (ABX), the world’s largest gold producer, gained $0.24 to $51.85 while widely-held Goldcorp advanced $0.31 to $49.18.  Silver royalty company, Silver Wheaton (SLW), climbed $0.57 to $44.05.

Yesterday’s trading session saw extraordinary volatility.  Scotia Mocatta Precious Metals Research team commented that “rising equities coupled with a decline in the dollar saw the metal reach a new all time high of 1448/1449 mid-morning.”  The note went on to state that “gold languished around this level until profit taking shortly after noon time took the metal lower…After triggering stops near the 1436 level, gold eventually reached an intraday low of 1431/1432.”

Scotia called the drop in the gold price off its new record highs “a bit of a disappointment.”  Whether yesterday’s decline is the beginning of a deeper correction will only be known in hindsight.  However, the gold price did advance for five consecutive days and may have been due for a pause.

Gold’s sister precious metal, silver, continues to outperform.  The silver price traded to new 31-year highs at $38.15 per ounce.  The Scotia team pointed out that “the Gold/Silver ratio made fresh lows to 37.93 before closing here at 38.22.  The ratio has been moving lower for the past 6 days off of 41.08. No reason as of yet to fight this trend.”

Gold prices continue to be supported by strong investment demand from both institutional investors as well as global central banks.  In a report released on Wednesday, the World Gold Council (WGC) highlighted the fact that “sales of gold by signatories to the third Central Bank Gold Agreement (CBGA3) have slowed to a virtual halt.”  The WGC noted that Russia’s central bank has been steadily accumulating gold while “almost halfway through the second year of CBGA3, only trivial sales have been conducted by Germany, Greece and Malta.”

The turmoil in the Middle East and Africa has also helped to support the gold price in recent weeks.  Precious metals have been bolstered by the violence in Libya and the uncertain geo-political environment.  When combined with the tragedy in Japan, central bankers may be more reluctant to tighten monetary policy.

Despite a number of encouraging economic reports in both the U.S. and across the globe, it remains to be seen whether private demand is strong enough to sustain the recovery.  The ballooning of public balance sheets has been critical in driving growth, but the mountainous deficits and debts do not come with a cost.  Confidence in fiat currencies has waned as sovereign balance sheets have weakened – driving investors to seek out gold bullion and investments tied to the gold price.

According to a recent Reuters report, Charles Oliver, portfolio manager at Canadian investment manager, Sprott, sees the gold price at $1,800 per ounce in the current calendar year and $2,000 an ounce by the end of 2012.

(Source: http://www.goldalert.com/2011/03/gold-price-hovers-under-record-high/)