GOLD PRICE NEWS – The gold price plunged $45.51 to $1,810.14 per ounce on Monday as European sovereign debt fears spurred widespread selling on Wall Street. The price of gold initially stabilized near $1,835, but extended its losses this afternoon. The SPDR Gold Trust (GLD), a proxy for the gold price and the world’s largest gold ETF, plummeted $4.35 to $176.35 per share.
Weakness in the gold price was fueled in part by a rally in the U.S. dollar against a basket of foreign currencies. The euro tumbled this morning to a seven month low of 1.35 against the dollar, before paring its losses to trade near 1.36 this afternoon.
Gold equities headed south alongside the gold price, with the AMEX Gold Bugs Index (HUI) falling 3.6% to 605.54. Notable decliners included Barrick Gold (ABX), AngloGold Ashanti (AU), and Kinross Gold (KGC) – which dropped 2.8%, 4.1%, and 3.5%, respectively.
Commenting on the short-term outlook for the gold price, UBS analyst Edel Tully wrote in a note to clients that while the gold price “is capable of rallying in the face of a strong dollar, an extended upward move in the dollar does put some obstacles in its path.”
Over the longer-term, however, Tully asserted that the gold price “should benefit from the scaling back of risk appetite on what appear to be rising fears of a Greek default, contagion to the rest of the periphery, and the impact on banks.”
Tully’s bullish comments over the longer-term echoed her stance from last week, when she raised the firm’s 2012 gold price target by 50% to $2,075 per ounce. There, she wrote that “Ongoing global macroeconomic disappointments, the inevitability of further negative turns in the European sovereign debt crisis, and low business, consumer and investor confidence will lead to gold being increasingly used as the line of defence against negative market outcomes. With the pool of competing asset alternatives sparse, ‘new’ money will flow into the gold market over the months ahead and into 2012, which has significant price implications.”
This morning, another investment bank – GMP Securities – raised its gold price forecasts. The firm increased its long-term gold price estimate from $1,350 to $1,575 per ounce. “We remain positive on the outlook for gold & precious metals and believe that the risk to our price forecasts are firmly to the upside,” analysts led by S. Craig West wrote. “With the U.S. Fed having indicated that it will maintain short-term rates at near-zero levels through at least mid-2013, coupled with continuing (accelerating) sovereign debt risks in Europe we see investment demand for gold remaining strong.”
GMP also addressed the fact that although it lifted its gold price target, it remains well below the current spot price. “We thought long and hard about taking a more aggressive stance, but decided to look at gold’s long-term uptrend which led us to discount the very sharp leg up we have seen in bullion since the beginning of August. If the passage of time suggests that we have indeed seen a new step-function change in gold prices we will re-examine our forecasts.”
Klondex Mines Delivers Updated Resource for Fire Creek
* The cut-off grade also resulted in an inferred resource estimate of 458,084 ounces of gold.
* During 2009 and 2010, 14 holes were drilled to in-fill known mineralization, eight holes were drilled to extend the known zones along strike and 13 holes were drilled to test new geophysical targets.
