GOLD PRICE NEWS - The gold price rose $2.12 to $1,163.27 Wednesday as the price of gold broke its three-session losing streak. Following yesterday’s $21 slide, the gold price stabilized near the $1,160 level after the Federal Reserve reiterated its cautious outlook on the U.S. economy. The SPDR Gold Trust (GLD), which acts as a proxy for the price of gold, climbed $0.27 to $113.78 per share. With today’s 0.2% gain, the gold price cut its monthly loss to 6.5% and remains higher by 6.2% in 2010.
The shares of most gold companies followed the gold price modestly higher, as the Philadelphia Gold & Silver Index (XAU) rose 0.3% to 166.78. The advance in the XAU reduced its loss this month to 6.1% and extended its year-to-date loss to 0.9%. The gold sector was able to advance in spite of a disappointing earnings report from Newmont Mining (NEM), which missed analysts’ estimates due in large part to lower than expected revenues and higher costs at its Boddington mine in Australia. Shares of NEM finished the day lower by 0.7% at $55.40.
The gold price held near $1,160 this afternoon following the release of the Federal Reserve’s latest Beige Book, which contains economic data collected by each Federal Reserve Bank in their respective districts. The Beige Book reported that economic activity across the U.S. has continued to rise in recent months, although the pace has “slowed” recently.
The Federal Reserve went on to note that overall labor market conditions “improved modestly” while wage pressures “continued to be contained on the whole.” However, the Beige Book also reported that activity in residential real estate was “sluggish” in most districts while commercial real estate markets - particularly construction - “remained weak.”
While the Beige Book provided a glimpse into Chairman Bernanke and the Fed’s latest outlook on the economy, the view of policymakers did not change materially. The economic recovery has continued to sputter in recent months, due in large part to the European sovereign debt crisis and the expiration of temporary monetary and fiscal stimulus measures.
The ensuing return of risk aversion in financial markets has significantly raised speculation that “Helicopter Ben” and the Federal Reserve will choose to reinstitute quantitative easing measures to help boost economic activity. But as the past several years have shown, there are many consequences to the Fed’s policies, not the least of which are a rising gold price and reduced faith in fiat currencies.
