GOLD PRICE NEWS – The gold price stabilized near $1,620 per ounce Wednesday morning despite a better than expected report on the U.S. labor market. The price of gold moved down to $1,597 in overnight trading but rebounded early this morning as the U.S. dollar turned lower against a basket of foreign currencies. The ADP employment report revealed that 91,000 private sector jobs were added in September, above the 75,000 consensus estimate among economists.
In contrast to the gold price, silver fell $0.73, or 2.4%, to $29.49 per ounce. Cyclical commodities were mixed, with copper off 0.9% at $3.08 per pound and oil up 2.3% at $77.44 per barrel.
On Tuesday the gold price dropped $34.76, or 2.1%, to $1,623.94 per ounce amid widespread selling in precious metals. The spot price of gold tumbled to an intra-day low of $1,595.10 but pared its losses as the broader commodities complex staged a considerable comeback. Silver prices fell to as low as $28.58, but bounced back to finish lower by just $0.26, or 0.9%, at $30.23 per ounce.
Weakness in gold and silver prices helped pressure shares of precious metals companies, with the Philadelphia Gold & Silver Index (XAU) sliding 2.3% to 178.79. Notable decliners included XAU components Agnico-Eagle Mines (AEM), Gold Fields (GFI), and IAMGOLD (IAG) – which dropped 3.2%, 4.2%, and 5.3%, respectively.
The XAU had been down as much as 5.8% at 171.27, but rebounded as the broader equity markets staged an impressive rally in the final hour of trading. The S&P 500 turned a 2.1% intra-day loss into a 2.3% rally by the close, fueled by short-covering and dip buying due to the oversold state of the markets.
In light of the recent gold price weakness, Macquarie Capital Markets analyst Stephen Harris published a report this week discussing his outlook for the yellow metal. The gold price sell-off “has caused some speculation that gold’s bull-run is complete and that this reversal will soon continue,” Harris wrote. “We disagree. We see the recent pullback as healthy and believe a confluence of factors have combined to create the ~15% decline from its highs.”
Harris’ view that the recent gold price correction has been “healthy” was based on several factors – including the fact that sentiment had reached a “bullish extreme” in early September and a consolidation was needed; “the flight to the US dollar has meant the recent pullback been far less severe in other currencies”; investor withdrawals from the GLD and general commodity funds “have likely created another headwind”; and that an increase in gold margin requirements amplified the impact on speculators, which led to excessive selling.
Despite the aforementioned headwinds, Harris reiterated the firm’s longer-term bullish gold price outlook. “We see US short rates remaining at current levels through 2015,” he wrote, during which time the price of gold has historically risen at a 25% annual rate. Additionally, “sovereign risk and the related use of unconventional monetary policy should keep investors wary of their world’s major currencies – the euro, dollar, and yen. Concerns will ebb and flow, but these issues are not going away any time soon.”
“We see little downside” for the gold price below $1,500 per ounce, Harris added. “Doubts will continue over the future of the euro, European debt defaults, and ultimately, debt monetization.” In terms of specific gold price targets, Macquarie reiterated its 2011-year end and 2012 estimates of $2,000 and $2,500 per ounce, respectively.
Canaco Makes Two Key Appointments
* He has held senior positions in engineering and project development with Emgold Mining, Hunter Dickinson, Freeport McMoRan, and most recently Silver Standard Resources.
* Mr. Mordaunt is a Registered Professional Geoscientist with more than 25 years of experience in mining, mine development and advanced exploration.
* In January 2010 Mr. Mordaunt retired from the role of Chairman and CEO of Stingray Copper Inc., which he founded, managed and merged with Mercator Minerals Ltd. in December 2009.
