Current Gold Price Weakness “Is Not Sustainable”



GOLD PRICE NEWS – The gold price oscillated between gains and losses on Monday as precious metals remained in their recent consolidation mode.  The spot price of gold held steady near unchanged at $1,695.67 per ounce, while the U.S. Dollar Index inched down by 0.1% to 79.534.  The SPDR Gold Trust (GLD), the world’s largest gold ETF and a proxy for the gold price, rose by a scant $0.05 to $164.22 per share.

Activity in the silver market mirrored that of the price of gold, as the spot price of silver rose by $0.04, or 0.1%, to $32.26 per ounce.  Other precious metals, however, fared worse than gold and silver.  Platinum futures slid by 0.6% to $1,609.75 per ounce while palladium dropped 0.6% to $698.30 per ounce.

Gold stocks fared slightly worse than the yellow metal this morning, as the Market Vectors Gold Miners ETF (GDX) dipped $0.25, or 0.5%, to $46.23 per share.  The sector also lagged the broader equity markets, as the S&P 500 Index climbed 0.7% to 1,423.52 amid signs of progress in the U.S. fiscal cliff negotiations.

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While the GDX remained in negative territory, a few notable GDX components moving higher included Randgold Resources (GOLD) and Harmony Gold (HMY).  Shares of GOLD and HMY rose by 0.8% to $100.48 and by 0.6% to $8.28, respectively.

Although gold prices have languished in recent weeks, analysts at Commerzbank reiterated their bullish outlook on the yellow metal in a recent note to clients.  “There are signs that the current price weakness is not sustainable,” the firm wrote, “and we envisage prices climbing significantly again in the medium term. Yesterday’s election in Japan, for example, is likely to have far-reaching consequences, among other things for the policy of the Japanese central bank.”

The analysts at Commerzbank were referring to the fact that Shinzo Abe, Japan’s newly-elected prime minister, has vowed to pressure the Bank of Japan to provide even more monetary stimulus to the nation’s struggling economy.

As for the central bank in the U.S., the Federal Reserve is expected to take a back seat this week following its decision last week to expand its quantitative easing program.  Instead, the fiscal cliff is likely to remain the most critical catalyst for the price of gold and other financial assets.

In addition, the U.S. economic calendar contains several reports that could have a material impact on the gold price.  The large majority of these items will be released on Thursday and Friday – including data on weekly jobless claims, existing home sales, third quarter GDP, manufacturing via the Philadelphia Fed Index, durable goods, and the University of Michigan Consumer Sentiment Index.

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