The gold price fell $4.66 to $1,109.65 as a bullish report on gold mining companies was unable to boost investments tied to the gold price, including gold stocks and gold ETFs. After the gold price rose $32 over the past two days - its best two-day performance in two months - the price of gold was unable to make it three straight as it fell victim to a stronger U.S. dollar and a better than expected ADP employment report. Gold mining stocks traded to the downside along with the gold price, as the Market Vectors Gold Mining ETF (GDX) finished lower by $0.43, or 1.00%, to $42.57. Canada’s S&P/TSX Global Gold Index, the most widely followed collection of gold stocks in Canada, fell $2.28, or 0.72%, to $313.30 as Canadian-based gold mining stocks experienced profit taking after their largest two-day rally since early December.

The weak performance of the gold price came despite the release of a favorable report on the price of gold by Deutsche Bank. The investment bank released its gold price forecast for the next two years - predicting the price of gold will average $1,150 per ounce in 2010 and $1,250 per ounce in 2011. Deutsche Bank also initiated research coverage on several of the world’s largest gold mining stocks - as well as many of the largest components of the GDX - including Barrick Gold (ABX), Goldcorp (GG), Kinross Gold (KGC), and Newmont Mining (NEM). The firm assigned a “Buy“ rating to U.S.-based Newmont Mining and Canadian-based Kinross Gold, while placing a “Hold“ rating on shares of Canadian gold miners Barrick Gold (ABX) and Goldcorp (GG) - the world’s two largest gold producers. In addition, Deutsche Bank said it favors those gold mining companies with the ability to generate higher free cash flow than their gold mining peers. The report highlighted shares of Newmont Mining as the top pick in the gold mining space, while Kinross Gold was recommended for investors looking for stronger growth in the gold mining sector.

While gold mining stocks as a group fell on the day, positive news from a few individual gold mining companies buoyed their stocks. Canadian-based gold mining producer San Gold (SGR.TSXV) displayed its leverage to the price of gold by reaching an intraday high of C$3.54, a 2.61% gain, before closing at C$3.47 - as the company announced that development on its 007 zone from the Hinge decline had started. San Gold also reported drill results from 007 that contained numerous high-grade gold intercepts, with the highlight being the intersection of 52.5 grams per ton of gold over 2.0 meters at over 300 meters below surface. Meanwhile, shares of Coeur d’Alene Mines (CDE) - one of the world’s largest silver mining companies as well as a sizeable gold producer - advanced $0.14, or 0.93%, to $15.24 per share. The Canadian silver and gold miner reported the discovery of a new high-grade vein system at its Kensington Gold Mine in Alaska, where gold production is expected to begin in the third quarter of 2010 at a rate of approximately 120,000 ounces of gold per year.

But it was this morning’s ADP employment report, which showed that 22,000 jobs were lost in January - less than the 30,000 predicted by a group of 37 economists in a Bloomberg survey - that caused the gold price to give back some of its recent gains. The relatively positive jobs data fueled further market speculation that the Federal Reserve may ease off its monetary stimulus or raise interests rates sooner than consensus expectations - a boon for the U.S. dollar and a headwind for the gold price and gold mining stocks. Heading into Friday’s nonfarm payroll data - an employment report Wall Street considers to be more significant than the ADP data - investors will look for continued evidence of an economic recovery. However, a disappointing payroll figure or unemployment rate will give the Federal Reserve more reason to leave the printing presses on - with the gold price continuing to be a primary benefactor.