GOLD PRICE NEWS – The gold price moved slightly lower, sliding $3.10 to $1,584.25 per ounce Friday morning as profit taking weighed on the yellow metal. The price of gold has gained 2.5% this week and 5.5% this month on the back of lingering sovereign debt issues and concerns U.S. policymakers will fail to reach an agreement to raise the $14.3 trillion debt limit.
Gold prices showed little reaction to the release of the Consumer Price Index (CPI) this morning. The June CPI fell 0.2% versus the previous month and rose 3.6% year over year. The figures were in-line with market expectations and failed to move either gold or the broader stock and commodity markets. S&P 500 stock futures gained 3.50 to 1310.20 while oil climbed $0.43 to $96.12 per barrel.
On Thursday, the gold price held firm despite efforts by Fed Chairman Ben Bernanke to back away from prior comments indicating that QE3 was a possibility. The price of gold reached a new record high of $1,594.50 per ounce in morning trading, but fell to $1,582 after Bernanke testified to the U.S. Senate that now is not the time for additional monetary policy easing. However, as trading progressed, the gold price bounced back into positive territory and finished higher by $4.27 at $1,586.65 per ounce.
Silver climbed alongside the gold price, rising $0.22, or 0.6%, to $38.44 per ounce. Gold’s sister precious metal reached an intra-day high of $39.40 – its highest level in over two months – but pared its gain following Bernanke’s testimony. With the advances, the price of gold and silver extended their year-to-date gains to 11.7% and 24.2%, respectively.
Strength in the price of gold and silver, however, was unable to boost precious metals equities. The Philadelphia Gold & Silver Index (XAU) slid 0.7% to 214.28. Barrick Gold (ABX) and Goldcorp (GG), the world’s two largest gold companies, fell 1.2% and 0.5%, respectively. Among silver shares, Pan American Silver (PAAS) and Silver Wheaton (SLW) retreated 0.6% and 0.7%, respectively.
On the first day of Bernanke’s semiannual testimony to Congress, the Federal Reserve Chairman created headlines when he stated that “The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support.”
While Bernanke’s comments on Wednesday helped send the gold price to a new all-time high, on Thursday he carried a much less dovish tone. “We’re not prepared at this point to take further action,” the Fed Chairman noted.
Although Bernanke’s latest commentary put pressure on the broader equity and commodity markets, the gold price displayed its resiliency by rebounding into positive territory as the day concluded. While the Fed may not immediately launch QE3, record high gold prices indicate that the markets believe a third round of asset purchases may not be too far away.
In Europe, although the sovereign debt crisis took a back seat to Bernanke over the prior two days, investors will be closely monitoring developments in Italy. The country’s lower house, Chamber of Deputies, will hold a confidence vote on a €40 billion ($56 billion) austerity package, following Thursday’s confidence vote approval by the Senate. Italy is hoping the austerity measures will help to alleviate concerns over the nation’s debt load, which is larger than the combined amount of Greece, Ireland, Portugal, and Spain.
Moving forward, UBS analyst Dominic Schnider wrote in a note to clients that “Sovereign debt problems in Europe and the U.S. and high inflation in emerging markets keep the structural outlook for gold bright. Gold is an outright buy from a diversification perspective. We target a move to USD 1,650/oz with price spikes above.”
UBS went on to elaborate on the factors supporting the gold price: “Market participants fear a default on the Greek debt, while the focus recently moved to Italy’s fiscal debt situation. The country’s debt is too big to be rescued…The U.S. still has no solution for its unsustainable debt dynamics either and disappointing economic data, such as the non-farm payrolls, have highlighted the risk that the Fed is likely to keep rates on hold for longer.”
As a result of these circumstances, UBS contended that “In the current period of elevated uncertainty, gold remains the ultimate currency. Investors realize that holding cash significantly erodes their purchasing power as inflation remains a concern. Investment demand for the inflation-protection qualities of gold is likely to stay strong.”
Claude Resources Confirms Approach to St. Eugene Mining
Claude noted that as the largest shareholder of St. Eugene (with 9.7% of the basic shares outstanding), Claude is disappointed by the strategic direction of St. Eugene evidenced by the recent announcement, and subsequent suspension, of a highly dilutive private placement with Churchill Natural Resource Partners L.P. that would have resulted in loss of control of St. Eugene at a discount to its trading price. Full Claude Resources Press Release.
