GOLD PRICE NEWS - The gold price climbed $9.47 to $1,240.85 Tuesday as disappointing data on the U.S. housing market fueled risk aversion in financial markets. The gold price opened modestly higher and climbed throughout the day as the price of gold was able to recover over one-third of yesterday’s sell-off. The SPDR Gold Trust (GLD), which serves as a proxy for the gold price, finished higher by $1.06 at $121.45 per share.
The advance in the price of gold came as the euro slipped 0.4% to 1.2284 against the U.S. dollar. The stronger dollar pressured most commodities, with the price of oil, natural gas, and corn falling 0.8%, 2.0%, and 0.7%, respectively. The gold price rallied alongside the greenback, however, as investors sought out the relative safety of the world’s reserve currency as well as the yellow metal. With today’s advance the gold price extended its monthly and year-to-date gains to 2.2% and 13.3%, respectively.
Gold stocks rose Tuesday morning alongside the gold price, but turned lower in afternoon trading as the broader market sold off. The Dow Jones Industrial Average (DJIA) finished lower by 148.89, or 1.4%, at 10,293.52, while the Market Vectors Gold Miners ETF (GDX) posted a more modest loss, falling $0.38, or 0.7%, to $52.14 per share. Notable decliners in the sector included Agnico-Eagle Mines (AEM), Freeport McMoRan Copper & Gold (FCX), and Yamana Gold (AUY) - which fell 1.3%, 4.3%, and 1.7%, respectively.
As investors look ahead to tomorrow’s Federal Open Market Committee (FOMC) meeting, the general expectation is that Chairman Ben Bernanke and the Federal Reserve will reiterate the same dovish message issued at every Fed meeting since the onset of the financial crisis in 2007. Despite an historic rally in stocks and cyclical commodities from the March 2009 lows, the economic recovery has shown considerable signs of stagnation and retrenchment in recent months.
The latest data to confirm the worsening trend was a report on May existing home sales, which unexpectedly dropped 2.2% to a 5.66 million annual rate - substantially below the 6.6% rise to 6.12 million expected by economists. The report was particularly disappointing because of the June 30th expiration of the $8,000 homebuyer tax credit for home sales to close.
The Federal Reserve will undoubtedly add the housing report to the expanding set of evidence indicating that the economic recovery has lost a substantial amount of traction. Moreover, this data will strengthen the case for further easy monetary policies - one of the primary catalysts for the gold price ascent.
