Gold Price Steady Despite Weak Jobs Figures

GOLD PRICE NEWS – The gold price oscillated around the $1,600 per ounce level Thursday amid a flurry of strong earnings reports from U.S. corporations.  The gold price showed a muted reaction to the positive quarterly earnings reports as well as news this morning that unemployment claims rose 10,000 to 418,000 in the most recent week – slightly worse than the 410,000 estimate.  After trading as high as $1,605 per ounce overnight, the price of gold fell back to $1,600 ahead of the opening bell on Wall Street. 

While the gold price stabilized, silver dropped 1% to $39.63 per ounce.  Yesterday, the price of silver fell to an intra-day low of $38.22, but turned higher and finished with a gain of $1.03, or 2.6%.  The prices of gold and silver have posted year-to-date gains to 12.3% and 28.7%, respectively.

On Wednesday, the gold price bounced back to $1,600 amid a quiet day in financial markets.  The spot price of gold initially slid to as low as $1,581 in morning trading, but rebounded to settle with a gain of $12.41 at $1,600.91 per ounce.  Strength in the gold price coincided with a modest sell-off in the U.S. dollar against a basket of foreign currencies.

Precious metals shares followed the price of gold higher as the Philadelphia Gold & Silver Index (XAU) climbed 0.6% to 219.06.  While the XAU remains lower by 3.3% year-to-date, it extended its gain in July to 8.9% – putting it on pace for its best month since February.  Among gold producers, Gold Fields (GFI) and Newmont Mining (NEM) advanced 0.4% and 0.5%, respectively.  Silver Standard Resources (SSRI) and Silver Wheaton (SLW), two of the world’s largest silver companies, rallied 2.5% and 2.4%, respectively.  Gold mining stocks traded unchanged early Thursday.

While the gold price and gold shares moved higher on Wednesday, most other sectors of the markets held steady ahead of today’s European summit on Greece.  Policymakers are meeting in Brussels, Belgium in an effort to craft a comprehensive plan that involves additional Greek bailout funds and hopes to keep the crisis from spreading to Italy, Portugal, and Spain.

Given the severity of the crisis, euro zone officials will also discuss several alternatives that have previously received strong opposition from various parties – including the use of precautionary credit lines, using the region’s primary €440 billion rescue fund to recapitalize European banks, a “temporary” Greek default, and a host of other policy measures.

Looking ahead, economic and political uncertainty surrounding the European debt crisis is likely to continue to provide a tailwind for the gold price.  However, technical and sentiment indicators suggest the price of gold may be due for a correction in the short term.

In the latest edition of The Gartman Letter, Dennis Gartman noted that despite open interest on the COMEX reaching a new all-time high earlier this week, the gold price turned sharply lower on Tuesday.  After reaching a new record high of $1,610.70, the price of gold tumbled to $1,580 per ounce, tracing out a downside “reversal.”

“We can there look for nearby spot gold to make its way back down to $1,500-$1,525 or so,” Gartman wrote.  However, he cautioned that such a development would not disrupt the gold price’s longer-term uptrend.  In addition, he noted that “It would return the market to relative health by taking the latest longs out of their positions and it would bring us back to the market as buyers again of that which we had sold.”

Commerzbank offered a similar gold price outlook to that of Gartman in a note to clients.  “Even if we assume further price rises for precious metals in the long term,” the firm wrote, “a boom is not a one-way street and the optimism on gold and silver especially was excessive recently in our view.”  Over the medium to long term, Commerzbank contended that support for the price of gold and silver “will come from production problems, which are currently curbing the expansion of supply, in addition to the persisting sovereign debt issue.”