GOLD PRICE NEWS - The gold price slid $7.04 to $1,185.07 Wednesday after Ben Bernanke’s testimony led to broad-based liquidation and pressured the price of gold. The SPDR Gold Trust (GLD), which acts as a gold price proxy, finished the day lower by 0.7% at $115.85 per share. Yesterday the GLD, the largest gold bullion ETF in the world, shed over 6 tons of gold - the biggest one-day decline since December of 2009. With today’s decline the gold price extended its weekly and monthly losses to 0.8% and 4.8%, respectively. Nonetheless, the price of gold remains higher by 8.2% year-to-date.
Weakness in the gold price came after the release of Federal Reserve Chairman Ben Bernanke’s semi-annual testimony to Congress on the state of the economy. In his prepared statement, Bernanke wrote that the economic outlook remains “unusually uncertain” amid the escalating sovereign debt concerns in Europe and the spillover effects it has caused. Furthermore, he noted that the labor market in the U.S. remains in its worst state since the Great Depression. As a result, Bernanke stated that the Fed would consider additional monetary policy tools if the economy does not improve further.
Bernanke reiterated his dovish stance in his testimony, which has been a primary catalyst behind the rise in the price of gold over the past decade. As for the path of the gold price moving forward, one investment bank issued a bullish report this morning on the yellow metal. CIBC introduced a 2012 gold price target of $1,500 per ounce, and raised its long-term forecast from $1,000 to $1,200 per ounce. In a report to clients, the firm wrote that “We think double dipping into gold as a combined insurance policy against a double dip recession and absolute performance stemming from a typical fall rally in bullion makes a lot of sense.”
In its report the CIBC also anticipated an “influx of money” into the gold sector in the coming months, noting the positive seasonality for gold during the months of September and November. The firm stated that gold stocks would reap the benefits of this trend, with Barrick Gold (ABX), the world’s largest gold producer, being the “prime beneficiary.” As a result, CIBC upgraded Barrick to “Sector Outperform” from “Sector Perform.” After rising as much as 0.8% this morning, shares of ABX finished lower by 0.2% at $41.73.
The sell-off in the gold price pressured shares of most other gold companies as well. Other notable decliners in the gold sector included Goldcorp (GG), Newmont Mining (NEM), and Randgold Resources (GOLD), which posted losses of 0.5%, 1.4%, and 0.8%, respectively. Shares of Freeport-McMoRan (FCX) - which are levered to both the gold price and copper price - bucked the trend, closing up 2.7% at $66.06 after reporting a 10% rise in net income for the second quarter of 2010.
