GOLD PRICE NEWS - The gold price rallied, closing up $2.78 at $1,182.28 per ounce, as investors interpreted the bailout of Greece as another example of governments debasing their money. The $146 billion rescue package announced this weekend not only failed to stem the decline in the euro, but actually accelerated it. COMEX gold futures rose for the sixth day in a row, closing up $1.50 at $1,182.20 per ounce as measured by the June contract.
The euro slid to 1.32 versus the U.S. dollar and the euro-denominated gold price hit a new all-time high above 900. Dollar-denominated gold prices sit less than 4% off their all-time record high of $1,126.50 per ounce posted in early December 2009.
While the gold price continued to rise, gold stocks were mostly weaker on the day, with the Market Vectors Gold Miners ETF (GDX) falling $0.63, or 1.25%, to $49.88 per share. Notable decliners in the sector included GDX components Newmont Mining (NEM) and Lihir Gold (LIHR), which fell 2.1% and 5.0%, respectively. Shares of NEM and LIHR were pressured by concerns that the Australian government’s plan to institute a 40% “super” tax will harm each of their operations in the country.
Greek government bonds rose and stock prices across the globe appreciated as a more severe immediate crisis was averted, but the long-term durability of the rescue package remains in doubt. Mohamed El-Erian dismissed the notion that the bailout will eliminate “contagion risk” and the co-chief investment strategist at PIMCO was vindicated by the fact that the yields on the 10-year government paper of Spain and Portugal did not decline.
The price of gold did not fall, despite the decline in risk aversion that permeated throughout the marketplace as investors maintained heavy gold exposure due to the long-term pressure the infusion of money into the system will place on fiat currencies. Marc Faber, editor of the Gloom, Boom, and Doom Report, in an interview with Bloomberg Television called for continued weakness in the euro, commenting that “Greece will default sooner or later anyways.” He stated that Greece should simply “leave the EU and default” as opposed to Europe throwing good money after bad.
Faber chastised not only Greece but nearly all developed economies for their massive unfunded liabilities, stating that they will either “all default or all print money.” A long-time gold bull, Faber exclaimed that “all currencies are doomed” and “the one currency that will keep its value is precious metals, gold.” Bernanke will “print and print and print” and the gold price will continue to go higher according to Faber.
