Gold Price Steady, Greece Approves Austerity Measures

GOLD PRICE NEWS – The gold price held near $1,725 per ounce Monday morning as the yellow metal digested the Greek approval of a new austerity program necessary to secure its next round of financial assistance.  The price of gold reached an overnight high of $1,735, but relinquished its gains as the U.S. dollar pared its losses against a basket of foreign currencies.  U.S. equity markets opened considerably higher as well, with the S&P 500 Index rising 0.6% to 1,350.92.

On Friday the gold price slipped $8.76, or 0.5%, to $1,720.20 per ounce as heightened European sovereign debt concerns fueled safe haven buying in the U.S. dollar.  The spot price of gold tumbled to as low as $1,703.69, but pared its losses as dip-buying emerged.  With its retreat, the gold price returned to negative territory for the week, by a modest 0.3%.  Furthermore, this marked the yellow metal’s first back-to-back weekly declines since mid-December.  However, on a year-to-date basis the gold price remains higher by 10.1%.

Silver headed south alongside the gold price on Friday, by $0.39, or 1.2%, to $33.51 per ounce.  Gold’s sister precious metal also posted consecutive weekly losses for the first time since December, although each week’s decline was less than 1%.  Moreover, silver remains one of the top performing asset classes thus far in 2012, with a gain of 20.9%.

Weakness in the gold price spread to shares of most gold producers, as the Market Vectors Gold Miners ETF (GDX) fell 1.4% to $54.49 per share on Friday.  For the week, the GDX sunk 3.5% and cut its year-to-date gain to 6.0%.  Barrick Gold (ABX), the world’s largest gold miner, outperformed its peers last week with just a 1.9% loss.  Newmont Mining (NEM), the only gold stock included in the S&P 500 Index, also fared better than the sector as a whole, as it dropped 2.3%.  Two of the largest decliners last week were Agnico-Eagle Mines (AEM) and IAMGOLD (IAG), which tumbled 4.7% and 5.1%, respectively.

On Sunday evening the gold price showed a muted reaction to news that the Greek parliament approved austerity measures necessary to receive €130 billion in new bailout funds.  The response of the euro currency was also rather tepid, as it inched fractionally higher to 1.3195 against the U.S. dollar.  The financial assistance will allow Greece to meet a March 20th deadline for a €14.5 billion bond repayment, without which a default would have occurred.  However, the latest austerity program included €3.3 billion in job, wage, and pension cuts – which had been items of serious contention in recent weeks and led to significant rioting in Athens over the weekend.

Greece’s finance minister, Evangelos Venizelos, stated to officials that “The question is not whether some salaries and pensions will be curtailed, but whether we will be able to pay even these reduced wages and pensions.  When you have to choose between bad and worse, you will pick what is bad to avoid what is worse.”

In the U.S., the week ahead is filled with several items likely to serve as catalysts for the gold price.  The economic calendar is particularly heavy this week, beginning with the January Retail Sales report on Tuesday. Wednesday’s schedule includes the MBA Mortgage Index and Empire Manufacturing Index for February, along with the afternoon’s release of the most recent Fed minutes.  On Thursday, Weekly Jobless Claims, Housing Starts, the Producer Price Index (PPI), and Philadelphia Fed Index will all be reported.  Lastly, the Consumer Price Index (CPI) – another key inflation gauge – and the January Leading Indicators data are set for release.