Gold Price Hits $1,626, Fresh All-Time High

GOLD PRICE NEWS – The gold price spiked to anther all-time high, touching $1,626 per ounce Wednesday morning.  The price of gold advanced following the news that durable goods orders unexpectedly fell 2.1% in June – versus expectations of a gain of 0.3%.  Worries that a more severe drop in consumer spending is forthcoming weighed on stock and commodity markets.  Crude oil fell 1.1% to $98.47 per barrel and copper sank 0.8% to $4.44 per pound.  Silver followed the gold price higher, rising to $41.07 per ounce.

On Tuesday, the gold price advanced $5.41 to $1,619.56 per ounce amid weakness in the U.S. dollar and ongoing concerns over the debt ceiling deadline.  In doing so, the price of gold finished at a new all-time high on a closing basis.  Gold prices have risen $125 in the month of July and are on pace to rise for the first time since April.

Silver has moved higher in concert with the gold price, bringing its advance in July to 18%.  Gold’s sister precious metal has climbed 32.5% year-to-date.  By reaching the $41 per ounce level, silver has now recaptured approximately 50% of its plunge off the 31-year high of $49.82 reached on April 25 to its five-month low of $32.30 on May 12.  Several market strategists have noted the importance of $41 per ounce from a technical perspective and expect this level to serve as meaningful resistance in the short-term.

The rally in the price of gold and silver was unable to meaningfully lift precious metals equities for the second consecutive day, however.  The Philadelphia Gold & Silver Index (XAU) was not dragged down by the sell-off in the broader markets, but finished in positive territory by just 0.2% at 218.84.  Large-cap gold producers were mixed, with Barrick Gold (ABX) and Yamana Gold (AUY) higher by 0.1% and 1.0%, while Goldcorp (GG) and Kinross Gold (KGC) fell 1.2% and 0.2%, respectively.

The gold price received support from not only the debt ceiling uncertainty on Tuesday, but also from TD Securities, which raised its price forecasts on the yellow metal.  The firm increased its gold price target to $1,512 from $1,400 per ounce in 2011 and to $1,700 from $1,400 in 2012.

In TD Securities’ report, analyst Greg Barnes wrote that “The higher gold price reflects our view that gold should benefit from the uncertainties facing the global economy and a continued trend by investors to seek way to insulate their portfolios against these ongoing risks.”

Barnes went on to say that “Economic conditions in the U.S. appear to be softening…Expectations of Fed tightening continue to be pushed back…given the economic backdrop, further easing by the Fed (QE3) would not be out of the question.”

Alongside the possibility of QE3, TD Securities cited several other “significant macro risks overhanging the global economy that should provide continued investment demand for gold, including: the potential for a double dip recession, risk of sovereign debt defaults, questions surrounding the future of the Euro, uncertainty regarding the long term status of the U.S. dollar as the world’s reserve currency, the sheer size of monetary stimulus that remains to be unwound, and developing world inflationary pressures.”

Dennis Gartman also provided commentary in support of the gold price in a recent edition of The Gartman Letter.  “We have returned…modestly…to the long side of gold in non-US dollar terms…The major trends remain upward and we remain bullish of gold as we have been for months and years.”

It is worth noting that Gartman’s bullish gold price outlook came despite his prediction that the U.S. will raise the debt ceiling by August 2 and not default.  The U.S. “has not defaulted in the past and it will not default next week.  The US is not Argentina.  The US is not Greece.  The US in not Russia…all of whom have defaulted on sovereign debts in the past one hundred years…The US is and shall remain the world’s reserve currency.”