GOLD PRICE NEWS – The gold price traded near unchanged Wednesday morning, oscillating around the $1,615 per ounce level. Gold prices surged as high as $1,641 per ounce overnight before backing off heading into the opening bell on Wall Street. News that the European Central Bank awarded $645 billion in three year loans, the highest total ever for a single operation, propelled gold higher in the overnight session. However, strength in the U.S. dollar kept a lid on gold, silver, and the bulk of the commodity complex.
On Tuesday, the gold price advanced $22.23, or 1.4%, to $1,614.91 per ounce amid a broad-based rally in global financial markets. Along with the price of gold, silver climbed $0.79, or 2.7%, to $29.58 per ounce. Gold and silver equities finished sharply higher as well, with the Philadelphia Gold & Silver Index (XAU) rising 3.6% to 185.40. Two of the sector’s top performers were Yamana Gold (AUY) and Silver Standard Resources (SSRI), which jumped 5.0% and 8.1%, respectively.
The broader U.S. equity markets were set to open slightly lower today after posting strong gains yesterday. The Dow Jones Industrial Average (DJIA) soared 337.32 points, or 2.9%, to 12,103.58. The advance marked the Dow’s best day in over a month and coincided with the CBOE Volatility Index falling to 23.22 – its lowest closing level since July 27. Stocks surged higher after data on November housing starts showed a 9.3% increase, the fastest pace since April 2010.
Despite Tuesday’s rally, the spot gold price remains lower by 7.5% in December and 16.0% below its $1,921 per ounce all-time record high – reached on September 6, 2011. Commenting on the yellow metal’s weakness in recent months, analysts at Morgan Stanley attributed it to a combination of “year-end portfolio adjustments, a flight to cash as concerns over the European sovereign debt crisis mounted in the face of further ratings downgrades and a related strong safe haven rally in the US dollar (USD).”
While Morgan Stanley highlighted that the chorus of those calling for the end of the gold bull market has risen substantially of late, it believes such calls are misguided. “While seasonal and non-gold market factors have undoubtedly played an important role in the two corrective waves of selling since September 2011, the unusual phenomenon of negative gold lease rates and falling gold prices points to other factors at work in the gold market,” the firm wrote. “We conclude that these probably relate to bank funding stress.”
Although Morgan Stanley expects such stresses to continue in 2012, it asserted that “Recent coordinated actions by six central banks, and separate actions by the ECB, suggest that non-gold-related measures to ease access to US dollar swaps will gradually ease the downside pressure on the gold price.” Furthermore, the firm predicted that the “corrective phase” in the gold price will end “when the Federal Reserve adopts a new round of quantitative easing in the H1 2012, weakening the US dollar and reigniting the safe haven trade for gold that is likely to see a renewed and successful challenge to the September 2011 high.”
As for a specific gold price target, Morgan Stanley forecasted the yellow metal will reach $2,200 per ounce in 2012. The firm reiterated that its outlook is based on the Fed implementing QE3, which will create “the makings of a renewed upward assault on the recent all-time high” in the price of gold.
Claude Resources Hits High-Grade Gold at Madsen
The Madsen Gold Mine is approximately 10 kilometers from the town of Red Lake, Ontario and is in one of the highest grade gold districts in the world. The Madsen Mine was the third largest gold producer in the Red Lake camp behind the Campbell and Dickenson Mines with a total of 2.45 million ounces of gold produced over its 38 year mine life. The property currently hosts a National Instrument 43-101 compliant Indicated Resource of 928,000 ounces at 8.93 g/t and an Inferred Resource of 297,000 ounces at 11.74 g/t. Full Claude Resources Press Release.
