Gold Price Hovers Near $1,668

GOLD PRICE NEWS – The gold price traded near unchanged at $1,668 per ounce Tuesday.  After breaking below $1,700 per ounce yesterday, gold prices failed to mount a rally this morning.  The gold price has been under pressure due to a stronger U.S. dollar and broad-based selling in financial markets – plummeting $44.86, or 2.6%, during Monday’s session.  With its decline, the spot price of gold dropped to its lowest level in seven weeks and extended its loss in December to 4.5%.

Heightened sovereign debt worries in Europe combined with ongoing global recessionary fears to send commodities and stocks lower across the board.  The SPDR Gold Trust (GLD), the world’ most liquid gold price proxy, settled with a loss of $4.41 at $161.99 per share.  Silver retreated alongside the gold price, sinking $0.85, or 2.6%, to $31.37 per ounce.  Platinum and palladium headed south as well, falling 1.8% and 3.8%, respectively.  As for cyclical commodities, copper declined 2.9% to $3.46 per pound and crude oil fell 1.4% to $98.04 per barrel.  Oil and copper both traded near unchanged early Tuesday.

Selling also engulfed investments tied to the price of gold, as the AMEX Gold Bugs Index (HUI) tumbled 3.5% to 542.02.  Notable decliners included Barrick Gold (ABX) and Newmont Mining (NEM), which slid 3.9% and 2.5%, respectively.  The broader equity markets finished firmly in negative territory, but well off their intra-day lows.   The S&P 500 dropped as much as 2.3% in morning trading, but pared its losses to finish down by 1.5% at 1,236.47.  S&P 500 stock futures, up 8.50 at 1237.80, pointed a strong open despite weaker than expected retail sales.

Cautious commentary from various rating agencies on the measures reported at last week’s European summit helped to pressure the markets on Monday.  Moody’s Investors Services announced that the summit produced few meaningful reforms and that the euro zone remains in a “critical and volatile stage.”  Fitch noted that the summit “imposes additional economic and financial costs compared with an immediate comprehensive solution.”

Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, was even more critical of European policymakers.  “The austerity measures will have a profoundly negative impact on economic growth,” he asserted, “and will make 2012 a very challenging year in economic terms.”

As for the gold price, Dennis Gartman – long-time commodities investor and author of The Gartman Letter – wrote on Monday that “We shall continue to reduce our exposure to gold and we had hoped to increase our exposure to equities, moving eventually to balance this position, holding equal sums of gold and equities while being short of the EUR.”

However, Gartman noted that with the recent uptrend in the euro-denominated price of gold breaking with yesterday’s sell-off, he sold his entire position in the yellow metal.  Although he acknowledged that he would consider buying back investments tied to the gold price in the future, Gartman did not provide a timeframe or a particular level at which such purchases would be made.

While Gartman effectively sounded the alarm on the gold market – at least in the short-term – UBS analyst Peter Lee presented a more neutral stance.  In a note to clients, Lee forecasted that the gold price is likely to stabilize in a trading range between $1,600 and $1,750 per ounce for the remainder of the year.  Subsequently, Lee predicted the gold price will resume its rally.  “We continue to favor gold over other commodities as geopolitical and economic uncertainties persist,” Lee wrote.  “Since the prevailing primary trend is up we expect gold will resume its uptrend and retest its $1,923 all-time high.”