GOLD PRICE NEWS - The gold price climbed $3 to $1,124 this morning as the price of gold looked to build on yesterday’s resiliency in the face of a stronger dollar and comments from China. With today’s rise in the gold price, the price of gold remained lower by $9 on the week, but higher by $6 for the month of March and $29 year-to-date. The U.S. Dollar Index (DXY) advanced 0.05, or 0.07%, to 80.650 this morning as the euro currency retreated 0.20% to 1.3578 against the dollar. At $1,124 per ounce, the gold price held up reasonably well in spite of the stronger dollar for the second consecutive day.

Since making a low near 74 in November 2009, the U.S. Dollar Index - which measures the greenback on a trade-weighted basis against a basket of other fiat currencies - has rallied nearly 9%. The euro, the largest component of the index at 57.6%, has fallen against the dollar from a 9-month high of 1.505 in November to a low near 1.343 reached last week. Due in part to these currency movements, the gold price - which has displayed a strong correlation to the euro since the onset of the financial crisis - has fallen over $100 from its all-time high of $1,226.50 reached in early December.

While the dollar’s rally pressured the gold price significantly in December and January, the price of gold has fared considerably better over the past month in spite of continued strength in the dollar. In addition, the dollar rally has led to a surge in investor sentiment toward the greenback. Based on the most recent data from the Bloomberg Professional Global Confidence Index, investors are the most bullish on the dollar since September 2008, due in part to expectations that the U.S. economy will expand at a quicker pace than in Europe and Japan.

According to the 1,612 participants in the survey - which measures investors’ expectations of the dollar’s direction over the next six months - sentiment toward the dollar rose from 55.72 in February to 66.39 in March. The measure is a diffusion index, such that a reading greater than 50 indicates respondents expect the dollar to strengthen.

From a contrarian perspective such a large rise in dollar optimism is a bullish sign for the gold price, which is generally thought of as an anti-dollar hedge. In a week particularly light on economic reports, market participants will be eyeing weekly jobless claims data on Thursday, as well as retail sales and the University of Michigan Consumer Sentiment Index reports on Friday. Going into the second half of the week market participants will look to see if the economic recovery continues to gather steam, as well as if the gold price can remain resilient in the face of the optimistic sentiment toward the dollar.