GOLD PRICE NEWS – The gold price plunged again Friday, sinking $56.70 to $1,684 per ounce. Gold prices have now fallen in excess of $100 over the past 48 hours. Heavy liquidation in COMEX gold futures has led to the fierce decline in the price of gold. Broad-based selling on Wall Street amid disappointing Chinese economic data, fears over a double-dip recession, and continued worries over the European sovereign debt crisis have weighed heavily on financial markets.
The price of gold came under significant pressure yesterday morning as the U.S. dollar rallied to a seven-month high against a basket of foreign currencies. The spot gold price fell to its lowest level since mid-August. The SPDR Gold Trust (GLD), the world’s most liquid gold price proxy, tumbled to $164.60 Friday morning – leaving the world’s second largest ETF lower by 6.4% this week.
The commodities complex posted steep losses alongside the gold price and investors liquidated dollar-denominated assets. Silver and copper have been two of the hardest hit commodities, with gold’s sister precious metal plummeting 9.9% to $32.95 per ounce, as measured by the front month silver futures contract. Copper, a bellwether indicator of global economic activity, plunged to $3.34 per pound, off 4% – its lowest level in over a year.
Gold equities were hammered on Thursday with the AMEX Gold Bugs Index (HUI) finishing lower by 7.7% at 564.26. Two of the sector’s largest decliners were Barrick Gold (ABX) and Kinross Gold (KGC), which fell 8.6% and 7.4%, respectively. Silver stocks fared even worse, as Pan American Silver (PAAS) dropped 10.0% and Silver Wheaton (SLW) retreated 12.8%. The broader equity markets sank as well, as the Dow Jones Industrial Average (DJIA) fell 391.01 points, or 3.5%, to 10,733.83 – its lowest level since August 10. Gold mining stocks looked to open sharply lower Friday morning.
The U.S. Dollar Index (DXY) rallied to an intra-day high of 78.80, a level it had not reached since late February of this year. Commenting on the gold price weakness and dollar strength, Societe Generale analyst David Wilson wrote in a note to clients that “Looking at gold, you have periods when you have strength in the dollar and rising gold, when both are seen as safe-havens, but right now, you’d have thought that gold would be well supported given the European situation, the U.S. situation and a slowing China…It’s really the dollar rally that is not particularly helpful.”
Legendary investor Jim Rogers echoed this positive sentiment on the dollar in a CNBC interview on Thursday. “I own the dollar. As we talked last time, I think the dollar is going to go higher…It’s going up against everything right now. There are various reasons for that, one of which is everybody is panicked and for some reason they are rushing into the U.S. dollar. The U.S. dollar is not a safe haven if you ask me but I do own it.”
Rogers – known for running the Quantum Fund with George Soros and for his positive stance on commodities over the past decade – reiterated that his bullish bet on the greenback is only for the short-term. Over the longer-term he sees it going considerably lower as the U.S. government remains committed to debasing its currency to stimulate economic growth. Rogers has also been a long-time gold bull and recently predicted that the gold price will soon surpass its $2,300 inflation-adjusted all-time high.
Although Rogers did not specifically discuss the price of gold in yesterday’s interview, his outlook for the global financial system and economy augurs well for higher gold prices over the longer-term. “The major problems are coming from the West, from Europe and the U.S. We’re much worse off than we were in 2008 because the debt has gone through the roof since 2008. At least in 2008 there was a possibility that governments could bail us out. Right now of course the governments have gotten deep into debt themselves.”
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