Wednesday afternoon’s release of the latest Fed minutes – a recap of the most recent FOMC meeting – indicated that the Ben Bernanke-led central bank could launch a third round of quantitative easing (QE3) if the U.S. economy worsens.

In particular, the minutes noted that “Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough.”

However, the Fed minutes also stated that “One participant noted the potential risks and costs associated with additional balance sheet actions.”

The financial markets showed a muted reaction to the summary of the Federal Reserve meeting, with the S&P 500 Index holding near unchanged at 1,330.45.  As for precious metals, gold oscillated between gains and losses near $1,542 per ounce while silver turned lower by $0.53, or 1.9%, to $27.16 per ounce.

The full text of the Fed minutes is available below:

http://www.federalreserve.gov/monetarypolicy/fomcminutes20120425.htm

As the price of gold advanced 6.7% to $1,669 per ounce in the first quarter of 2012, several large-scale institutional investors added to their positions in the SPDR Gold Trust (GLD).

According to their latest 13-F filings, Soros Fund Management, PIMCO, and the Teacher Retirement System of Texas raised their GLD holdings between January and March of this year.

The largest increase on a per share basis came from the firm founded by legendary investor George Soros, which increased its GLD holdings by 274% to 319,550 shares.

Eton Park Capital, the firm run by Eric Mindich, bought 739,117 shares of the GLD in the first quarter after not having a position prior to 2012.

In addition, Paulson & Co. – the hedge fund run by billionaire John Paulson and the largest shareholder in the GLD – maintained its stake at 17.3 million shares.

A Reuters report on the data suggested that “Analysts read the first quarter filing by Paulson as a sign that the hedge fund manager, a well-known gold bull, has not lost his faith in the precious metal as a long hedge against inflation.”

GOLD PRICE NEWS – The gold price bounced back from overnight losses on Wednesday alongside European and U.S. financial markets.  The spot price of gold fell as much as $16.38 to $1,526.50 per ounce in overnight trading – its lowest level since December 29, 2011 – before rebounding into positive territory by $6.67 at $1,549.55.  The SPDR Gold Trust (GLD), a proxy for the gold price and the world’s largest gold ETF, advanced $0.89 to $150.63 per share.

Silver recouped its earlier losses in conjunction with the price of gold and other precious metals.  Near the opening of European markets, silver was down by $0.51 at $27.18 – its worst level as well since the end of 2011 – but later rose back to trade higher by $0.13, or 0.5%, at $27.82 per ounce.  Platinum futures climbed from an overnight low of $1,422.60 to $1,440 per ounce, while palladium jumped from $587.20 to $597.40 per ounce.

As the gold price turned higher, gold shares did as well.  The Market Vectors Gold Miners ETF (GDX) opened modestly higher and extended its gains in mid-morning trading, by $1.32, or 3.4%, to $40.66 per share.  Today’s strength in gold shares was a welcome respite for the GDX, which yesterday fell to $39.25 – its lowest level since September 2, 2009.  Barrick Gold (ABX), the sector’s largest company, rallied $1.02, or 2.9%, to $36.01 per share.  Newmont Mining (NEM), the only gold stock included in the S&P 500 Index, rose $1.12, or 2.6%, to $44.51 per share.

Equity markets in England, Germany, and France all opened sharply lower on Wednesday, but later staged a considerable comeback in concert with the euro currency.  The euro slid to 1.2682 against the U.S. dollar – its worst print since January 17th of this year – but subsequently climbed back to 1.2747.  U.S. equity markets opened near unchanged but quickly turned higher.  The Dow Jones Industrial Average (DJIA) added 0.5% to 12,698.11 while the S&P 500 Index rose 0.6% to 1,338.89.  Risk aversion declined modestly as well, with the CBOE Volatility Index (VIX) down by 4.1% at 21.07 this morning.

The markets extended their gains after two better than expected U.S. economic reports.  Housing starts rose 2.6% in April to an annual rate of 717,000, above the 690,000 median estimate among economists.  Industrial production increased 1.1% last month, beating the 0.6% consensus forecast.

Barry Knapp, head of U.S. equity strategy at Barclays, stated in a Bloomberg interview that “The U.S. economic data is consistent with the bottom not falling out of the equity market.  Yet the situation in Europe is extremely precarious. Everybody wants Greece to stay in the euro, but does Greece want to stay? More needs to be done. You can’t have a lot of confidence that assets will stabilize.”

Commenting on the outlook for the gold price, Societe Generale analyst Robin Bhar contended that “It’s difficult to see a turnaround just yet. There will be one, but I don’t think this is the time, just when we are in the eye of the storm…Clearly, with people staring into the abyss, it could (decline) $50 or even $100 lower as it washes out. That is the unpredictability of it all and as equities fall, as the Greeks take money out of the banks and the banking sector collapses, I suppose you’d have to be wary of further price falls just to cover for losses in other markets.”

Extorre Gold Mines (XG.TSX, AMEX: XG) reported high grade drilling results from its Cerro Moro project in Argentina and commented on current market conditions.  The emerging gold company noted that it believes that the present market for the company’s shares “does not reflect the underlying value of its high quality asset at Cerro Moro.  Extorre also announced that it is evaluating the potential for a staged mine development to take advantage of the substantial cash flows which would be generated from the very high grade mineralization accessible by open pit mining.  The Company would then fund the balance of the capital expenditure reported in PEA-3 through operating cash flow.

Highlights:

* Extorre noted that the staged mine development is advancing rapidly as the Company is particularly sensitive to shareholder dilution, and that the financing alternatives being pursued will be those that are the least dilutive to shareholders

* A public announcement on the parameters for the proposed staged development initiative is expected before month end

* Hole MD1552 intersected 5.00 meters (m) at 54.0 grams per tonne (g/t) gold + 7,155 g/t silver, including 2.45m at 109.3 g/t gold and 13,561 g/t silver

* Hole MD1571 intersected 1.60m at 22.8 g/t gold + 674 g/t silver, including 0.40m at 93.4 g/t gold + 2,638 g/t silver

Matt Williams, Extorre’s Exploration Manager:

“One drill rig remains on the infill drilling program on our principal prospects, namely Zoe, Escondida, Loma Escondida and Gabriela. Our aim is to ensure that the drilling density is sufficient in areas that would fall within the first two years of a potential mining scenario (at 1300 tonnes per day) to estimate ‘indicated mineral resources’. This program is nearing completion, with the drilling at Zoe, Loma Escondida and Gabriela essentially complete.”

Trevor Mulroney, President and CEO of Extorre:

“My task in leading Extorre through mine development to production represents a unique opportunity to demonstrate the real value of the Cerro Moro project. The grade of the deposit is clearly spectacular by industry standards and I intend to show how those grades will translate into very substantial shareholder value.”