GOLD PRICE NEWS – The price of gold rebounded modestly on Friday following several days of significant weakness. Gold prices received a boost from financial markets moving into risk-off mode as progress on the U.S. fiscal cliff situation stalled. The spot gold price rose by $9.09, or 0.6%, to $1,658.35 per ounce in morning trading while the SPDR Gold Trust (GLD) advanced $0.97, or 0.6%, to $160.68 per share.
The yellow metal was undeterred by a moderate amount of strength in the U.S. Dollar Index, which added 0.4% to 79.561 against a basket of foreign currencies. Silver bounced back in concert with the price of gold, by $0.28, or 0.9%, to $30.26 per ounce. Gold’s sister precious metal has also faced considerable selling pressure this week, as both metals fell yesterday to multi-month lows.
Gold and silver stocks moved into positive territory alongside the gold price, but their gains were muted by a sell-off in the broader equity markets. The Market Vectors Gold Miners climbed by just $0.22, or 0.5%, to $45.29 per share while the S&P 500 Index retreated by 14.52 points, or 1.0%, to 1,429.17.
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Among gold stocks, notable advancers included GDX components Agnico-Eagle Mines (AEM), Kinross Gold (KGC), and Newmont Mining (NEM). Shares of AEM rose by 1.0% to $51.33, KGC by 1.4% to $9.53, and NEM by 1.4% to $44.70.
The gold sector’s gains this morning came as politicians in Washington, D.C. failed to come to an agreement to avert the looming fiscal cliff ahead of the Christmas holiday. Yesterday evening, Republicans in the House of Representatives voted against the “Plan B” developed by their own de-facto leader, Speaker of the House John Boehner.
As a result, lawmakers are not expected to resume their negotiations until after Christmas, leaving only one week before the end of the year when automatic spending cuts and tax hikes are scheduled to take effect.
The voting rejection led to an overnight panic in financial markets, as S&P 500 futures experienced a mini-flash crash by going limit-down – i.e., falling by the the largest amount allowable. However, the markets recouped a substantial portion of their losses ahead of the opening of U.S. markets.
Nevertheless, Mitsubish analyst Matthew Turner wrote in a note to clients that “Nervousness over the fiscal cliff is possibly keeping some investors on the sidelines.” With regard to the price of gold, Turner added that “it is unclear how gold will react to the ongoing fiscal cliff talks.”
From a technical perspective, strategists at Credit Suisse contended that “The next few days will be important for gold. If the market is unable to rebound above important technical levels, the weakening chart picture could start to affect the longer-term outlook. The next short-term support is at $1,630.”