Gold Price Firm, U.S. GDP Misses Expectations

GOLD PRICE NEWS – The gold price held firm near $1,720 per ounce Friday morning after fourth quarter U.S. GDP growth came in at 2.8%, below the 3.0% consensus estimate among economists.  The price of gold hovered in a tight range between $1,718 and $1,728 in overnight trading, while the U.S. dollar stabilized against many of the world’s leading currencies.  Silver held near unchanged at $33.60 alongside the gold price, while U.S. equity markets opened modestly lower following the disappointing GDP report.

On Thursday the gold price rose $8.89, or 0.5%, to $1,720.44 as the yellow metal’s positive momentum fueled further gains.  The spot price of gold climbed to an intra-day high of $1,732.60 but pared its gains as the U.S. dollar rebounded against a composite of foreign currencies.  The SPDR Gold Trust (GLD), a proxy for the gold price and the world’s largest gold ETF, settled higher by $0.85 at $167.27 per share.

Silver posted a substantially more modest gain than the gold price yesterday, as it inched higher by $0.08, or 0.2%, to $33.42 per ounce.  Other precious metals were mixed, as platinum climbed 1.5% to $1,605.00 per ounce and palladium dipped 0.3% to $689.00 per ounce.  Cyclical commodities finished largely in the black, with crude oil rising 0.5% to $99.86 per barrel and copper advancing 1.5% to $3.89 per pound.

Gold stocks continued to push higher in concert with the gold price, as the Market Vectors Gold Miners ETF (GDX) jumped 1.0% to $55.76 per share.  The gold sector also outperformed the broader equity markets for the second consecutive day, as the S&P 500 Index slid 0.6% to 1,318.43.  Among the large-cap gold producers, notable advancers included Kinross Gold (KGC), Newmont Mining (NEM), and Randgold Resources (GOLD).  KGC closed higher by 1.2% at $11.41 per share, NEM by 0.3% at $60.45, and GOLD by 1.0% at $111.94.

With yesterday’s rise, the gold price reached its highest level since December 7, 2011 and extended its year-to-date ascent to 10.0%.  The yellow metal’s best day of late came on Wednesday after the Federal Reserve extended its zero interest rate policy commitment from mid-2013 to late-2014.  The Ben Bernanke-led central bank also added a new phrase to the FOMC statement by noting that it “expects to maintain a highly accommodative stance for monetary policy.”

Ole Hansen, senior manager at Saxo Bank, commented that “The strong rally in gold changed what prior to the (Fed) announcement had been a test of gold’s resolve.  The Fed statement changed all that, and from thinking that the gold rally potentially only had one year left to run, it could now continue for longer…The ‘off’ button on the printing press has well and truly been taped over.”

Barclays Capital analyst Suki Cooper offered a bullish take on the gold price as well, but urged a bit of caution in the near term.  “Precious metals have taken off near term, breaking through several important resistance levels,” Cooper wrote in a note to clients.  However, she contended that “We are wary of markets being overstretched though and look for gold and silver to correct ahead of prior highs.”

Over the longer-term, Cooper asserted that “Coupled with continued central bank appetite for gold, the broader macro backdrop remains conducive for gold price gains, given negative real interest rates, concerns over longer-term inflationary pressures and uncertainty surrounding the financial markets and economic outlook.”