GOLD PRICE NEWS - The gold price crossed back above $1,120 per ounce as commodities, stocks, and the price of gold all moved higher on the back of stronger risk appetites. Credit spreads have narrowed and equity volatility has waned, evidenced by the 27% drop in the VIX in just three weeks. Riskier assets are back in vogue and while the gold price has moved higher over the past month, it has underperformed most of the commodity complex.

Since February 8, the price of gold has appreciated 5.3% against a 9.6% rally in the oil price and a 14.6% surge in the price of copper. On a year-to-date basis, the performance of the gold price compares much more favorably as the yellow metal is up 2.1% versus a 3.7% decline in the benchmark commodity index, the Reuters-Jefferies CRB.

Gold stocks have lagged the price of gold in 2010 as the Market Vectors Gold Mining ETF (GDX) is lower by 3.4% this year in spite of gains in the gold price. Investors and traders have trimmed gold-related investments against the backdrop of a weakening euro, which is lower by 5.6% versus the U.S. dollar just this year alone. Whether the rally in the U.S. dollar is a function of stronger fundamentals for America’s economy or whether it merely reflects a deteriorating macro-economic backdrop facing other foreign currencies has been hotly debated.

It is clear that the ongoing uncertainty with respect to Greece’s fiscal situation and its impact on the euro has weighed on Europe’s common currency. The same is true of the weakness in the British pound, which has continued to slide as the country’s political leadership faces a loss of confidence in their ability to contain their growing deficits.

The U.S. dollar is currently the currency of choice as investors are squarely focused on the issues and challenges facing many of the other leading global currencies. The bull market in the dollar-denominated gold price has stalled as America’s currency has increased on a relative basis. But the fact remains that real interest rates are still negative, deficit and debt figures compared to gross domestic product are still climbing, and the Federal Reserve’s balance sheet still hold over $2 trillion of, in many cases toxic, derivatives. These facts suggest the highs in the gold price may still be in the future.

In 2009, David Einhorn of Greenlight Capital, while building up exposure to high gold prices, echoed many investors’ concerns with respect to all global fiat currencies when, in reference to the U.S. dollar, euro, yen and pound, he stated last Fall, “I conclude that picking one of these currencies is like choosing my favorite dental procedure. And I decide holding gold is better than holding cash, especially now, where both earn no yield.”