GOLD PRICE NEWS – The gold price rose $12.20 to $1,180.97 Friday as the spot price of gold eyed its first three session win-streak since late May. The SPDR Gold Trust (GLD), which acts as a gold price proxy, finished higher by $1.20 at $115.49 per share. With today’s advance, the gold price extended its year-to-date gain to $86.25, or 7.9%, but remained lower by $62.68, or 5.0% in July. This month’s performance was the worst for the gold price since its 7.1% slide in December 2009, and was the first down month since this past March.
Friday’s rally in the gold price boosted shares of most gold stocks, as the Market Vectors Gold Miners ETF (GDX) gained $0.54, or 1.1%, to $48.22 per share. Notable advancers in the sector included AngloGold Ashanti (AU), Freeport-McMoRan Copper & Gold (FCX), and Gold Fields (GFI). Shares of AU, FCX, and GFI closed higher by 2.4%, 1.1%, and 3.7%, respectively.
The strength in the gold price was fueled in part by the disappointing U.S. GDP report, which showed gross domestic product growth of 2.4% on an annualized rate – below the 2.6% expected by economists. The worse than expected GDP number was the latest piece of evidence that the Federal Reserve and Chairman Ben Bernanke will use to stress the need to continue unprecedented easy monetary policies – a primary catalyst for the rise in the gold price in recent years.
One of the foremost prognosticators of a higher gold price has been John Embry, Chief Investment Strategist at Sprott Asset Management, the Canadian-based hedge fund founded by long-time gold bull Eric Sprott. In the latest edition of Investor’s Digest of Canada, Embry presented his continued bullish outlook on the gold price in a piece titled “Gold’s on the cusp of a parabolic move up.”
Embry discussed the implications for the gold price in light of recent economic developments across the globe: the European sovereign debt crisis, rising fiscal deficits at all levels of government in the U.S., and the potential for further stimulus programs. The impact of the sovereign debt crisis in Europe has caused policymakers around the world to reiterate the importance of continued stimulus measures. However, the consequences of these actions are becoming considerably more serious as fiscal deficits levels are rising to unprecedented levels.
The noted investor described this set of events as a “primary factor in the rising price of gold,” and added that the growing shortage of physical gold will further push the gold price higher. Part of the supply constriction is caused by European central banks which as a group have sold none of their gold quota this year, after being net sellers of gold reserves in the past. But an intriguing piece to the supply puzzle is what Embry believes to be a fraud perpetrated by the World Gold Council and International Monetary Fund (IMF) as to their complicity in allowing central banks to report significantly more gold reserves than they actually possess. Once the actual amount of reserves is made known, the implications of the real supply of gold on its price will be considerable. “We are on the cusp of a parabolic move in the price of gold underwritten by physical shortages. Central banks can no longer supply the amount needed to balance supply and demand while mine production continues to stagnate at best.”
