GOLD PRICE NEWS – The gold price slid $26.83 to $1,843.27 per ounce Friday morning amid widespread liquidation in precious metals. In doing so, the price of gold surrendered approximately half of yesterday’s 2.9% rally and turned back into negative territory for the week. Yesterday the gold price held firm after Fed Chairman Ben Bernanke’s speech on the economy and U.S. President Barack Obama’s jobs speech last evening. COMEX gold futures – per the December 2011 contract – climbed to $1,889.10 in overnight trading, but tumbled to as low as $1,825.50 at approximately 6:15am ET on heavy volume.
The sharp reversal lower in the gold price did not coincide with any significant macroeconomic news, although speculation has risen in recent days that the COMEX is planning to hike gold margins once again. Commenting on the gold price sell-off, Macquarie analyst Hayden Atkins wrote in a note to clients that “People are probably very exposed to gold now, because they’ve been so bullish, yet the technicals aren’t that great now that you’ve had that double-top pattern coming through.”
Atkins went on to say that “There is no real direction provided by other markets. I guess this is a sign that people are interested in taking profits at these kinds of prices, in the absence of direction from anywhere else.” The “double-top” pattern that he referred to stems from the fact that the gold price peaked near $1,920 per ounce on two occasions over the past month – August 22 and September 6 – and subsequently turned sharply lower on each occasion. This development is often a worrisome sign from a technical perspective and can lead to further price declines.
Gold equities looked to open lower alongside the price of gold this morning. The Market Vectors Gold Miners ETF (GDX) – which yesterday reached a new all-time record high of $66.94 per share – fell to $65.77 in pre-market activity. Barrick Gold (ABX), the world’s largest gold mining company, retreated 1.4% to $54.42 per share. Newmont Mining (NEM), the largest U.S.-based gold producer, dropped 1.6% to $64.63 per share this morning.
On Thursday the gold price extended its gains following Bernanke’s latest economic commentary. His speech contained “no surprises and will do nothing to dispel market expectations of further easing action at the September FOMC meeting,” according to Jan Hatzius, chief U.S. economist at Goldman Sachs. In a note to clients, Hatzius wrote that Bernanke’s “description of current conditions and the economic outlook was broadly in line with other recent Fed communication—including the August FOMC statement and minutes, and his recent speech at the annual Jackson Hole conference.”
Hatzius also noted that while Bernanke “continued to say that the Fed expected stronger growth in the second half, he again pointed out that some of the causes of weakness in growth earlier in the year could be more persistent. On inflation, Bernanke noted that while headline inflation had picked up, inflation is expected to moderate as ‘transitory influences wane.’ The Fed currently sees ‘little indication that the higher rate of inflation … has become ingrained in the economy’.”
Hatzius also published a report on Obama’s speech, noting that “The President’s proposal is larger than expected, with spending proposals and tax cuts both somewhat greater than expected. This proposal does not imply a significant shift in the fiscal restraint in 2012, but it is consistent with our expectation that the payroll tax cut will be extended, and the fact that some of the new proposals involve additional tax cuts increases the probability that Congress will enact them.”
While the President’s jobs program is receiving considerable attention today, it is unlikely to have a large impact on the direction of the gold price due to the fact that its size is small relative to the Federal Reserve’s monetary policies, and – more importantly – because it does not address the fundamental structural problems in the U.S. of excessive public and private sector debt levels and policymakers’ misguided insistence on preventing debt restructurings from occurring.
Coupled with fact that the Fed has committed itself to near-zero interest rates through mid-2013 and is expected to launch further easing measures in the coming months, the longer-term outlook for the gold price remains bright – notwithstanding shorter-term corrections as is occurring this morning.
Sunridge Expands Drill Program at Gupo Gold
- This next phase of drilling will include approximately 5,000 meters of reverse circulation drilling of 60 closely spaced drill holes and approximately 1,000 meters of diamond drilling of 8 drill holes.
- Gold mineralization at Gupo extends over a strike length of approximately 1.6 kilometers.
- The resource is at surface and drilling has shown mineralization to extend at least to 80 meters vertical depth and remains open at depth.
