GOLD PRICE NEWS - The gold price in terms of the euro reached a new all-time high of €828 per ounce as the price of gold recovered its entire $20 overnight decline and the euro weakened against the U.S. dollar. While gold prices remains over $100 lower than the record high of $1,226.50 per ounce in dollar terms, the significant weakness of the euro since early December 2009 has boosted the price of gold in euros to its fourth consecutive daily new high. For the week the gold price finished higher by $25, up $26 year-to-date.
In addition to the euro, the gold price came within 1.7% of its all-time high of 732.45 against the British Pound and has outperformed other precious metals, base metals, and commodities - including silver, platinum, oil, and copper - over the past several months. The recent rally in the price of gold against numerous fiat currencies speaks to the underlying strength of the gold bull market, as nations across the globe continue to debase their currencies in an effort to fuel an economic recovery.
The resiliency of the gold price this past week has been particularly impressive, given the emergence of a number of headwinds over the past two days. Wednesday after the U.S. equity market close, the International Monetary Fund (IMF) reported that it will “shortly“ begin selling 191.3 tonnes, or $6.9 billion, of gold bullion remaining from the 403.3 metric tons the IMF announced that it was planning to sell on September 18, 2009. In 2009, the other 212 tonnes of gold were sold to the central banks of India, Mauritius, and Sri Lanka. After the release of the IMF news, the gold price dropped over $15 to below $1,100 per ounce - but recovered the entire overnight decline and finished in positive territory on Thursday.
For the second consecutive day the gold price fell after the U.S. equity market close, as the Federal Reserve announced that it was raising the discount rate by 25 basis points to 0.75%. Once again the price of gold fell below $1,100 in overnight trading but recovered a large portion of its losses to finish the week at $1,117.83 per ounce.
As market participants scrutinized the Fed’s decision and the insignificance of the discount rate hike, investments tied to the gold price resumed their upward climb. While the small increase in the discount rate was the first move by the Fed to tighten monetary policy - and signaled that it is not completely ignoring the risks of inflation stemming from near-zero interest rates and a $1.25 trillion quantitative easing program - the Fed has yet to credibly indicate that fighting deflation is no longer its primary objective. Until such time as that occurs, the gold price stands to continue to rise against all of the world’s leading fiat currencies.
