GOLD PRICE NEWS – The gold price surged higher Monday, rising $29.00 to $1,667 per ounce. Weakness in the U.S. dollar, spurred by healthier risk appetites amongst investors, propelled the price of gold. The euro rose against the greenback following a pledge this past weekend from French and German leaders to do whatever is necessary to prevent a banking crisis. S&P 500 stock futures climbed 15.40 to 1170.30, which crude oil rose 2.2% to $84.80 per barrel.
Last week, the gold price ended a four-week losing streak as it rebounded 0.9% to $1,638.08 per ounce. The price of gold began the week with a 2.1% rally, but relinquished a considerable amount of its gain after several better than expected U.S. economic reports. Key labor market data was released on Friday with non-farm payrolls coming in at 103,000 – above the 60,000 consensus estimate among economists. With its advance, the gold price extended its year-to-date gain to 15.3%. However, the price of gold remains 14.9% below its $1,922.20 all-time high, recorded last month on September 6.
Silver followed a similar path to the gold price last week. The spot price of silver climbed 4.1% to $31.16 per ounce and returned to positive territory on a year-to-date basis, by 0.7%. Gold’s sister precious metal was the second best performing component of the 19 member Reuters-Jefferies CRB Index this morning, advancing 3.7% to $32.14 per ounce .
Gold and silver equities moved higher as well early Monday with the Market Vectors Gold Miners ETF (GDX) rising 2.3% to $56.10 in pre-market activity. Notable advancers last week included Goldcorp (GG) and Yamana Gold (AUY), which added 1.3% and 2.8%, respectively. However, the sector continues to lag gold and silver prices by a wide margin with the Philadelphia Gold and Silver Index (XAU) lower by 17.3% in 2011. Additionally, the gold price/XAU ratio now sits at 8.7, indicating that gold equities, on a historical basis, are undervalued relative to the yellow metal.
While the gold price has remained in a correction mode over the past month, many precious metals strategists see the yellow metal resuming its advance in the months ahead. The latest firm to raise its gold price forecast was Morgan Stanley, which predicted that gold will be the top-performing commodity in 2012.
The price of gold is likely to rise to a new all-time as investors continue to safeguard their wealth in an environment of declining economic growth, according to Morgan Stanley’s Hussein Allidina. The firm raised its 2012 gold price target by 35% to $2,200 per ounce, and said it could reach $2,464 in a “bull-case” scenario. As for silver, Morgan Stanley lifted its target to $50 per ounce.
“With macro headlines threatening demand across the complex, we have become more selective about commodity exposure,” Allidina contended. “Gold and silver are our top commodity picks heading into 2012.”
“Gold, and silver to a much lesser extent, are viewed as safe havens and stores of value as well as the closest thing to a global reserve currency,” he added. Gold “has been the most resilient in past recessions.”
Looking ahead to this week, there are several key economic reports likely to serve as catalysts for the gold price. The Fed minutes – a recap of the most recent FOMC meeting – will be released on Tuesday, followed by weekly jobless claims on Thursday. The week concludes with retail sales and University of Michigan Consumer Sentiment on Friday.
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