GOLD PRICE NEWS – The gold price surged higher Tuesday, climbing 1.8% to $1,639 per ounce. The price of gold broke out above its 200-day moving average and has now advanced $76, or 4.8%, thus far in 2012. Stocks and commodities rose alongside gold as investors speculated that Chinese policy makers were set to pursue more aggressive monetary easing. S&P 500 stock futures gained 13.50 to 1289.10 while the cyclically-sensitive copper price rose 2.7% to $3.51 per pound.
Gold prices opened the week on Monday with a modest decline, dipping $7.40, or 0.5%, to $1,609.52 per ounce. The price of gold initially climbed to $1,624.80 in early morning trading yesterday, but traders took profits as the yellow metal was able to launch an attack on its 200-day moving average of $1,633 per ounce. The SPDR Gold Trust (GLD), the world’s largest gold ETF and a proxy for the gold price, finished lower by $0.70 at $156.50 per share.
In contrast to the price of gold, silver advanced 0.8% to $28.90 per ounce amid moderate weakness in the U.S. dollar. Silver’s rally continued today as gold’s sister precious metal soared 3.8% to $30.12 per ounce. Platinum and palladium futures rallied moved higher as well, rising to $1,470 and $643 per ounce, respectively. The broad-based move to the upside in the precious metals complex came on the back of a weaker dollar, which fell 0.22 to 80.76 as measured by the U.S. Dollar Index (DXY).
Gold shares bucked the trend of the lower gold price on Monday and posted strong gains Tuesday morning. Several large-cap gold mining companies were in the news yesterday with Goldcorp (GG) and Eldorado Gold (EGO) issuing 2012 production forecasts that came in below several analysts’ estimates. Nevertheless, GG climbed 1.7% to $44.73 and EGO finished unchanged at $14.39 per share. CIBC upgraded Newmont Mining (NEM) to Sector Perform from Sector Underperform and raised its price target to $86.00 from $82.00 per share. Despite the upgrade, NEM closed down by 0.8% at $61.84 per share.
Since reaching its $1,923 all-time high on September 6, 2010, the price of gold has now fallen 14.7%. However, the strong move to the upside in gold in the New Year has prompted many analysts to ponder whether the multi-month correction in gold prices is over. Long-time gold bull Bill Fleckenstein discussed the yellow metal’s recent travails in his latest weekly MSN Money column. “I’m sure precious-metals bulls were extraordinarily frustrated late in 2011, as gold and silver were sold regardless of the news,” he wrote. “In any event, as the year ended, the stage was set for a potent rally in the metals, and that was what I think we saw starting (last) Tuesday. The questions now are whether the last week of December was the low for this entire decline, and whether we get some sort of test of those prices (as well as what such a test might look like).”
“Since so many people trade gold on a technical basis, the determining factor for what the next pullback looks like may be dictated by whether it can get over its 200-day moving average,” Fleckenstein added.
As for the macroeconomic factors influencing gold prices, Fleckenstein contended that “Central banks the world over mean to print however much money it takes to avoid anything remotely approaching a declining cost of living, with only the Europeans being unwilling to stand up and say that is exactly what their goal is. Thus, the long-term outcome is not in doubt, although the short-term twists and turns are, as always… in the end, all roads lead to money printing, debased currencies and inflation until the printing press is taken away.”
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