GOLD PRICE NEWS - The gold price fell $1.01 to $1,209.71 Wednesday following the release of the latest Federal Reserve minutes. With today’s fractional drop, the gold price extended its monthly loss to 2.7%, but remained higher by 10.4% year-to-date. The SPDR Gold Trust (GLD), which serves as a proxy for the gold price, finished the day lower by 0.1% at $118.30 per share. The gold price has now closed within a $14 range for the past ten trading sessions as it awaits its next major catalyst.
Shares of gold miners and gold explorers held steady alongside the gold price. The Market Vectors Gold Miners ETF (GDX), which contains a basket of mining companies, finished lower by 0.3% at $50.26 per share. Despite a lower gold price, Gold Fields (GFI), Harmony Gold (HMY), and Randgold Resources (GOLD) posted gains of 0.7%, 1.4%, and 0.8%, respectively. Notable decliners included Freeport-McMoRan Copper & Gold (FCX), Goldcorp (GG), and Royal Gold (RGLD), which fell by 0.7%, 0.5%, and 0.7%, respectively.
While the gold price remained in a holding pattern, the broader market was mixed, with the Dow Jones Industrial Average (DJIA) rising a scant 3.7 points to 10,366.72. With today’s gain the DJIA extended its win streak to eight, as the broader market index has surged from its low of 9,603.80 last week. Market volatility also picked up, with the CBOE Volatility Index (VIX) climbing 1.4% to 24.90.
The gold price oscillated around the $1,210 level Wednesday, opening near $1,207 this morning and rising to as high as $1,217 in mid-day trading, before finishing slightly lower. The price of gold showed little response to release of the minutes from the most recent Federal Open Market Committee (FOMC) meeting, which provided investors with Chairman Bernanke and the Fed Governors’ latest view on the economy.
Policymakers at the FOMC meeting referenced the fact that new stimulus measures may be needed if the economy continues its recent path of worsening fundamentals. However, the Fed noted that further accommodative policies are currently needed. As for the risks of inflation, the FOMC reiterated its outlook that inflationary expectations remain low. Moreover, the recent slack in the labor market, along with greater risk aversion in financial markets, are likely to put downward pressure on inflation.
The implications on the gold price of the Fed’s view remain as they have been since the onset of the financial crisis - notably “Helicopter Ben” is likely to maintain easy monetary policies for the foreseeable future. Furthermore, the Fed appears willing to reignite the printing presses if/when necessary to combat the ongoing risks of deflation. As long as the Federal Reserve maintains this outlook, the backdrop for a strong gold price remains quite favorable.
