GOLD PRICE NEWS – The gold price fell back under $1,500 per ounce Friday morning, sliding $11.50 to $1,488.50 per ounce. Precious metals and commodities were weaker across the board, led by a 2.1% drop in the silver price to $33.96 per ounce and a 0.9% fall in crude oil to $94.56 per barrel. While the gold price declined, the U.S. dollar traded flat versus the euro and most of its foreign counterparts.
Today’s weakness in the gold price follows yesterday’s $13.03 decline, sending gold out on a weak note to end the first half of 2011. The drop in the price of gold was fueled by concerns over the prospect of tighter money across the globe – coming on the back of Greece’s approval of new austerity measures. The end of the Federal Reserve’s second round of quantitative easing, QE2, which concluded on June 30, also fueled selling in gold prices.
Yesterday’s modest sell-off in the price of gold and silver did not deter precious metals equities, however, as the Philadelphia Gold & Silver Index (XAU) climbed 0.9% to 201.13. In doing so, the XAU is now higher by 4.8% this week and on pace for its best week since April 4-8 of this year. Notable advancers included XAU components AngloGold Ashanti (AU) and Freeport-McMoRan Copper & Gold (FCX), which added 0.5% and 2.5%, respectively. Weakness in the gold price, as well as silver, led to softer gold and silver stocks heading into the open on Wall Street this morning.
Over the previous two days, Greek lawmakers passed legislation to implement a host of austerity measures in order to secure the next tranche of financial assistance from the European Union (EU) and International Monetary Fund (IMF). The measures which include the privatization and selling of many state-owned assets, higher tax rates, defense spending cuts, and several other items. With the legislation approved, euro zone finance ministers are scheduled to meet on July 11 and 12 to finalize the next stage of the Greek bailout.
Commenting on the implications for the gold price, Dan Smith, a metals analyst with Standard Chartered, wrote in a note to clients that although the Greek vote is not supportive of gold, other economic factors have helped keep the gold price north of $1,500 per ounce. “We see a lot of confusion about the Greek situation. The whole situation in Europe is distorted,” Smith stated. “There has been some safe-haven buying because of Greece and it’s coming out of the market now … But the long-term story is still bullish for gold. Investors are looking for protection against event risk.”
With real interest rates still negative across most of the globe, the fundamental macro-economic backdrop for the gold price remains supportive. The big question entering the second half of 2011 is whether gold mining stocks will be able to end their consistent underperformance of the gold price, a phenomenon that has driven many investors to shun the gold stocks in favor of the more direct leverage offered by exchange-traded funds.
Canaco’s Director of Project Development Receives Awards
* The medal is based on whole-of-career accomplishments, including research and student mentorship, success in exploration or mining, and service to SGA and other organizations.
* Dr. Groves has published widely in international journals, mentored and supervised innumerable postgraduate students, and was instrumental in Canaco's discovery and success at its Handeni and Harvest exploration projects in Africa.
* Dr. Groves has also been bestowed the Penrose Gold Medal from SEG, the highest honor bestowed on a geologist; he will be the first person to be awarded both the SEG Penrose Gold Medal and the SGA-Newmont Gold Medal.
