GOLD PRICE NEWS – The gold price rebounded in the late morning session, recovering most of its daily losses that sent the price of gold briefly trading under the $1,240 level. The gold price fell after the U.S. Labor Department reported a net loss of 54,000 jobs in the month of August, boosting the unemployment rate by one-tenth of one percent to 9.6%. The gold price ended the day at $1,246.94, down $4.24, off a fraction from its previous close.
Gold stocks were mixed, with the Market Vectors Gold Miners ETF (GDX) edging higher by $0.05 to $53.62. San Gold (SGR.TSXV) reported an updated Rice Lake resource estimate of 2.47 million tons at 11.7 g/t gold in the measured and indicated category and 6.21 million tons at 9.9 g/t gold in the inferred category.
Tonnage in the indicated category increased significantly at San Gold’s 007 Zone to 305,240 tons due to a high level of drilling activity during the first half of 2010 in order to upgrade from the inferred category. Exploration and definition drilling as well as initial development will continue throughout the last half of 2010. Shares of San Gold have rallied 26% over the past 52 weeks.
Recent history has taught us that bearish news for the economy is bullish for the gold price, as the price of gold climbed 5.6% in the month of August while a steady stream of news and data showed the U.S. economy slowing to a crawl. So this morning, when investors socked it to the gold price and pushed stocks higher in the minutes after the Labor Department report, many gold price observers were left scratching their heads.
But it could be that investors came away with a glass-half-full mindset after the unemployment report, since the consensus estimate of losses in August was forecasted at a much higher 100,000 jobs. Consequently, not-as-bad-as-expected news was good news, for today anyway, as investors proceeded to hit the gold price in favor of stocks. But as the gold price consolidated around the $1,240 level, buyers returned and sent the price of gold back up toward $1,250.
With the major market indices oscillating in a fairly defined trading range over the past couple months, it could be that even a scrap of not-as-bad news with respect to the unemployment picture was just enough to spark a market that was already technically ripe to continue to rebound from the lows it posted in the last days of August. But investors cannot ignore the fact that the unemployment situation continues to move in the wrong direction, and with it goes consumer confidence, consumer spending, and ultimately business activity and investment.
Despite the ineffectiveness of unprecedented fiscal and monetary policy to keep the economic recovery going, there are calls within Congress, the Administration and the Fed to do more of the same – more stimulus, more easy money, more quantitative easing. While evidence of any positive impact made by these programs on economic growth is scarce or questionable, the toll such policies are taking on the value of currencies around the world is unmistakable. The printing of money in the guise of quantitative easing dilutes a currency’s value, adding nothing to wealth or productive capacity, and hurting those who save.
Which is why investors – and a growing number of central banks of countries with export economies – are accumulating gold and assets with exposure to the gold price. Recently Dennis Gartman , publisher of The Gartman Letter, pronounced gold the world’s third reserve currency, after the U.S. dollar and the euro. While it is not actually the third largest asset held as reserves in central banks, Gartman was referring, in a demonstrable way, to gold’s emergence as a currency in its own right. As government debt increases and money supplies swell, the gold price is one of the few assets investors can turn to preserve their wealth.
