The gold price ended the week lower for the first time in six weeks, dropping 1.8% to $989.38 per ounce. After breaking decisively through the $1,000 barrier and closing above it for nine straight trading days, the gold price sold off along with broader market equities and more cyclically-based commodities. The S&P 500 fell 2.2% this past week while crude oil declined 8%, posting its largest weekly loss since mid-July. The silver price was off 5.7% this week, closing at $16.04 per ounce.

Worries over the economic outlook heightened as existing home sales and orders for durable goods came in well shy of analyst expectations. The broader market has seen a virtually uninterrupted advance off the March lows, and the same is true of most industrial commodities. Risk aversion has declined markedly as volatility levels have come down, credit spreads have narrowed, and asset classes have appreciated. The weak dollar has been the one common denominator providing the most accurate clues for the markets direction. With the dollar being the new global funding currency, traders and investors have implemented dollar carry trades in order to get long other higher-yielding assets. If the U.S. dollar strengthens, all bets are off, and these same assets will be subject to liquidation.

The gold price was caught in a wave of liquidation this week in spite of dovish comments out of the Federal Reserve Open Market Committee (FOMC) on Wednesday. Gold mining stocks followed both the gold price as well as broader market equities lower, evidenced by the 6.2% weekly decline in the Market Vectors Gold Mining ETF (GDX). The macro outlook remains bullish for both the gold price and gold mining equities. However, net longs in COMEX gold futures are still at high levels and sentiment remains bullish. Given these facts, combined with the possibility of a counter-trend move in the U.S. dollar and the prospect of a further correction in the S&P 500, the risk of additional declines in the gold price and gold miners remains high.