Gold Price Steady as U.S. Dollar Firms

GOLD PRICE NEWS – The gold price traded near unchanged Tuesday morning at $1,545 per ounce as the U.S. dollar stabilized versus the euro.  The price of gold came under heavy selling pressure yesterday, sliding $18.00, on broad-based liquidation in the precious metals.  Silver, which closed down 8.5% yesterday, also traded relatively flat at $43.70 per ounce heading into Tuesday’s opening bell on Wall Street.  Risk aversion is on the rise this week as volatility indices moved higher and stocks and commodities moved lower.

The gold price remains comfortably its 200-day moving average of $1,453 per ounce, but has declined $33.00 off its $1,577.50 record high posted early yesterday.  On Monday, the action in the gold price was marked by heightened volatility as the price of gold swung violently.  After hitting posting a new all-time high, the gold price quickly moved down to $1,542.40 following news of Osama bin Laden’s death.  However, the yellow metal then rebounded to as high as $1,575.80 following reports from Iranian TV that Israeli planes in Iraq were preparing a strike against Iran.  In afternoon trading the gold price returned to negative territory near $1,550.

The silver market experienced an even wilder ride than the gold price, first plunging from $48 to $42.20 following the United States’ announcement that bin Laden had been killed.  Silver then rallied back above $47 Monday morning, before tumbling back toward $44 per ounce.  Helping to grease the skids of the precipitous drop in the silver price was another series of margin requirement increases by the CME Group – in an effort to curb excessive speculation.

The weakness in the price of gold and silver fueled a substantial sell-off in gold and silver equities, with the Philadelphia Gold & Silver Index (XAU) falling 3.15 to 215.40.  With the loss, the XAU extended its year-to-date slide to 4.9%.  Notable decliners alongside the gold price included on Monday included Goldcorp (GG), Harmony Gold (HMY), and Kinross Gold (KGC) – with losses of 5.5%, 2.8%, and 3.4%, respectively.  Similarly to the gold price, gold mining stocks traded near unchanged early Tuesday.

Commenting on Osama bin Laden’s death, legendary investor Warren Buffett stated in a CNBC interview that he felt good upon hearing the news, but remains concerned about other threats of terrorism.  “The desire to do us (the United States) harm exists in too many people around the world.”

While the death of bin Laden deservedly garnered the majority of attention on Monday, the financial markets will quickly shift gears as a bevy of economic data points is released over the balance of the week – some that could provide a catalyst for the price of gold.  On Wednesday, the monthly ADP employment report will be released, along with the ISM Services report for April.  Thursday’s schedule includes weekly jobless claims and a report on productivity, while the highly-anticipated April nonfarm payrolls and unemployment report are due out on Friday.

If the upcoming reports reflect what Fed Chairman Bernanke characterized as a “moderate” rebound in economic activity, the gold price is likely to remain a prime beneficiary.  Conversely, better than expected economic data will embolden inflation hawks calling for tighter monetary policy, and could present a headwind for the price of gold.

Bart Melek, Head of Commodity Strategy at TD Securities, reiterated his bullish outlook on the gold price in a note to clients on Monday.  “If the economy continues to recover and inflation picks up, investors will be increasingly worried that the US central bank is behind the inflation curve.  Real interest rates should trend lower, lowering opportunity costs of holding zero-yielding assets, and thus increasing demand for commodities.”

“Continued record-low interest rates are also likely to apply selling pressure on the US dollar,” Melek continued.  As a result, he predicted that the gold price is likely to “rally even further.”

(Source: http://www.goldalert.com/gold-price-steady-as-u-s-dollar-firms/)