Gold Price Soars to Fresh Record High at $1,921

GOLD PRICE NEWS – The gold price traded to yet another record high at $1,921 per ounce overnight before moving back toward $1,900 Tuesday morning.  The price of gold surged following heavy liquidation in European stock markets on the back of a key election loss by German Chancellor Angela Merkel’s political party.  S&P 500 stock futures plunged 27.30 to 1,142 while the cyclically-sensitive copper price, lower by 1.8% to $4.05 per pound, headed for its largest loss in over a month.

The Global Precious Metals Team at TD Securities noted, “Gold has made new all time highs overnight as Eurozone nerves continue to fray and equities feel the heat…Fundamentals remain in place…debt fears, low yields and a weaker USD all serving to keep Gold bid, though recent fresh buying always vulnerable to corrective pullbacks.”

The rally in the gold price follows a 3.1% rise last Friday, when the yellow metal surged following the worse than expected U.S. non-farm payrolls report.  As economic data deteriorates across the globe, investors are increasingly moving a greater percentage of their assets into gold as a safe haven and store of value.

Gold equities looked to open the week in positive territory alongside the price of gold.  Last week the AMEX Gold Bugs Index (HUI), a basket of the world’s largest gold companies, advanced to a new all-time high of 622.27 and extended its year-to-date gain to 7.8%.  On Friday, notable advancers included Barrick Gold (ABX), Goldcorp (GG), and Newmont Mining (NEM) – which climbed 2.3%, 2.6%, and 3.2%, respectively.

While U.S. markets were closed yesterday for Labor Day, the gold price rallied and equity markets in Asia and Europe posted steep losses amid escalating euro zone sovereign debt concerns.  The rising fears stemmed from the news that German Chancellor Angela Merkel’s political party suffered its fifth election loss this year and its worst showing since 1990.

Financial markets viewed the loss as a strong indication that support for euro zone bailouts is waning.  Coupled with last Friday’s losses, the Stoxx Europe 600 Index posted its largest two-day decline since March 2009.  The euro currency tumbled to 1.4060 against the U.S. dollar, its lowest level in over a month.

Although this week’s economic calendar is on the lighter side, there are several key items likely to impact gold prices and the broader markets.  The ISM Services Index is due out later this morning, followed on Wednesday by the Fed’s Beige Book.  Weekly jobless claims will be released on Thursday, along with President Obama’s proposal of a new stimulus program aimed at boosting the employment market.

In addition to Obama’s announcement, Ben Bernanke is scheduled to provide his latest economic outlook in a speech on Thursday.  Investors will be paying close attention to see if the Federal Reserve Chairman provides any signals regarding monetary policy at the upcoming FOMC meeting on September 20-21.

Commenting on the outlook for the gold price, UBS analyst Edel Tully wrote in a note to clients that “With the implications of Friday’s U.S. payrolls report and intense focus on European sovereign issues this week, gold has two strong reasons to rally.  Additional evidence of U.S. economic weakness raises the likelihood that the Federal Reserve will announce further easing this month.  As European woes reclaim center-stage and in turn investor nervousness extends, these factors will support gold in the coming weeks.”