Gold Price Sinks 1.2% on Dollar Strength

NEWS GOLD PRICE - The price of gold fell 1.2% to $ 1,413 per ounce last week, the decrease in back of strength in U.S. dollar and broad-based weakness in the commodity sector. The price of gold back into negative territory in 2011 after investors and traders weighed the impact of comments from St. Louis, James Bullard, president of the Fed this weekend calling for the Fed to "review QE2."
The active program to purchase $ 600,000,000,000 is scheduled to be completed in late June and has provided a tailwind, not just the price of gold, but the commodities complex as a whole. Oil, which rose to $ 105 per barrel last week is less than 1% to $ 104 while sister metal gold is precious, silver fell 1.9% to $ 36.62 per ounce.
The share prices of producers of gold mining and explorers traded lower ahead of the opening bell on Wall Street. Despite the wide press coverage on record gold prices and the sinking U.S. dollar, gold mining shares have not been able to make much further progress this year. So far in 2011, the Medal of Philadelphia Gold and Silver Index (XAU) is lower by 5.3%, led by a fall of 12.2% on the widely held Newmont Mining (NEM). Rising fuel costs and labor, strong local currency, and higher than the cost of capital is expected have led to pressure on profit margins despite a gold price comfortably above $ 1,400 oz.
The euro weakened after the Christian part of the German chancellor, Angela Merkel, the Democratic Union suffered its worst election result since 1952 in the southwest section of Baden-Wuerttemberg. As a result of poor election results of Merkel and the continuing concerns that Portugal is in need of a rescue package of up to $ 100 billion, the euro is trading weaker against most major currencies world.
U.S. dollar has been under heavy selling pressure in recent weeks not only against the euro, but the currencies of leading products such as Canadian and Australian dollars. Helping to boost both the price of gold, and most of the commodities complex has been the weak U.S. dollar. After trading in a new 52-week low last week to 75.25, U.S. Dollar Index (DXY) has risen more than 1% to 76.34.
If the U.S. dollarhas bottomed out or is it that the consolidation of a new lower band materializes could be the key to whether gold prices are able to approach the $ 1,500 per ounce level next month. In the past three days, Bullard, president of the Fed and Plosser warned that both the Federal Reserve must consider the possibility of normalizing monetary policy.
Bernanke has remained firmly pacifist and the upward trend in the price of gold and oil may stay until investors and traders believe that he is willing to terminate its asset purchase program and chart a new course in direction of higher interest rates. hawkish rhetoric may be increasing among central bankers, but markets can not ignore the threats to fight inflation until there is some hint of the concrete measures taken.
Helicopter Ben earned his nickname of nine years of preaching the power of the Fed to fight deflation. Gold prices have been on a steady upward trend during the same period of time and looks set to continue higher until the chairman of the Fed raises interest rates or whether it reduces the size of the Federal Reserve of 2000000 million dollars, more balance. While the price of gold will always suffer corrections - as it has done in recent years - gold bull market appears to be intact.

(Source: http://www.goldalert.com/2011/03/gold-price-sinks-1-2-on-dollar-strength/)