GOLD PRICE NEWS – The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices.
The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively.
Commenting on the breakout above $1,600 per ounce, TD’s Global Precious Metals team highlighted “the inflation adjusted all-time high in gold, going back to 1980 is $2,479.30 per ounce.” However, they did caution that “The yellow metal remains very well bid and it does feel like it’s on everyone’s radar at the moment – just have a look at the CFTC figures which show gold longs increasing by some 5 million ounces last week – the largest weekly increase since September 2009 and now within 4.4 million ounces of the record net long position.”
Silver surged higher alongside the price of gold to open the new week, gaining $0.80 to $40.11 per ounce Monday morning. Gold’s sister precious metal, silver, rose 6.6% last week – climbing to a ten-week high. The silver price has now appreciated 14.5% in June and 28.5% in 2011. The rising price of gold and silver pushed precious metals equities higher this month. The Philadelphia Gold & Silver Index (XAU) posted a weekly gain of 4.3%. Notable advancers included Newmont Mining (NEM) and Randgold Resources (GOLD), which climbed 4.7% and 5.1%, respectively.
Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the possibility of additional asset purchases. On Wednesday, “Helicopter Ben” offered a dovish tone and alluded to a new round of quantitative easing (QE), which sent the gold price to a new high. However, the following day he backtracked, noting that now is not the proper time for a third round of QE. In spite of the change in tone, the price of gold held firmly in positive territory over the balance of the week.
J.P. Morgan’s Michael Jansen offered a bullish gold price outlook in a note to clients, stating that the key event this past week was “Ben Bernanke’s somewhat Jekyll and Hyde performance on the Hill, in which he floated the idea of QE3 on Wednesday but more or less retracted it Thursday which contributed to a lot of the volatility in the broader equity and risk indices. For the main commodities though – especially gold – traders seemingly only listened on Wednesday and then started watching the Open on Thursday as gold has held up extremely well.”
In addition to the potential for QE3, J.P. Morgan highlighted additional support for the gold price from “the sovereign train-wreck brewing in Europe and the potential for a technical default in the US (as indicated by Moody’s with the notice that the US Treasury was on notice for a potential downgrade).” As a result, the firm contended that “the event risk is unlikely to recede this week or any time near term,” which should continue to support higher gold prices.
Looking ahead, Goldman Sachs strategist Alec Phillips wrote in a note to clients that “The balanced nature of Chairman Bernanke’s policy discussion suggests that Fed officials continue to see a high bar for either monetary tightening or easing. That said, we think that Bernanke’s remarks signal an upgrade of the seriousness of the easing discussion within the committee. Although Bernanke already listed these easing options in response to a question during the press conference on June 22, and the minutes to the June FOMC meeting likewise discussed the possibility of further easing in two places, we see their inclusion into the prepared remarks as a moderate dovish surprise.”
West Kirkland Expands Drill Program
