GOLD PRICE NEWS – The gold price fell $14.27 to $1,841.38 Monday morning as sovereign debt concerns in Europe led to broad-based liquidation in financial markets. Gold equities looked to open lower alongside the price of gold, with Barrick Gold (ABX) and Newmont Mining (NEM) down 0.9% and 1.2%, respectively, in pre-market activity.
While investments tied to the price of gold have largely benefited from global economic worries, this was not the case this morning. Commenting on the gold price sell-off, long-time commodities investor Dennis Gartman wrote in his daily Gartman Letter that “The margin clerks will be sharpening their knives today and will take dead aim even upon gold if that is where they think they can find liquidity.” He also noted that some investors “will argue that gold will prove valuable and will hold its value even as stock prices plunge, and in the long run they may well be right.”
Last week the spot price of gold reached another new all-time high of $1,922.20 per ounce as recession worries in the U.S. and euro zone continued to reverberate across financial markets. However, the gold price subsequently turned sharply lower for the second time in less than a month, fueling calls for a further correction in the yellow metal. For the week, the gold price finished lower by 1.4%, but remains higher by 1.6% in September. Silver fared considerably worse than the gold price last week, as it fell 5.2% amid widespread weakness in the commodities complex.
Although the gold price posted it second weekly loss in three, a rather encouraging sign emerged in the precious metals space. Gold equities not only climbed to a new record high alongside the price of gold, but as a group they continued their recent trend of outperforming the yellow metal. The Market Vectors Gold Miners ETF (GDX) reached a new high of $66.98 per share on Friday, and posted a 1.4% weekly gain. Furthermore, the GDX is now higher by 4.9% this month.
The euro zone sovereign debt crisis continued to be at the forefront of economic concerns last week. Rumors of a Greek default escalated on Friday after a report that German Chancellor Angela Merkel’s government is “preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults,” according to three coalition officials.
Confidence in policymakers’ ability to contain the crisis was dealt another blow on Friday when European Executive Board Member Juergen Stark unexpectedly resigned due to “personal reasons.” Stark was widely thought to have been opposed to the resumption of bond purchases, according to Reuters, which cited two sources that spoke on condition of anonymity. Carsten Brzeski, ING Bank’s senior economist, wrote in a note to clients that Stark’s resignation may increase the likelihood of further monetary policy easing by the European Central Bank (ECB).
In the U.S., although economic data was relatively light last week, speeches by Fed Chairman Ben Bernanke and President Barack Obama illustrated that policymakers remain quite concerned over the prospects over a renewed recession. Investors are eagerly anticipating the next FOMC meeting on September 20-21 to see if the Fed will expand its accommodative policies and perhaps launch a third round of quantitative easing (QE3).
This coming weekly contains several key economic reports that are likely to serve as catalysts for the gold price and the direction of U.S. monetary policy. The Producer Price Index (PPI) and Consumer Price Index (PPI) – two key measures of inflation – are due out on Wednesday and Thursday, respectively. Retail sales for August will also be released on Wednesday, followed by weekly jobless claims and the Philadelphia Fed Index on Thursday. Lastly, University of Michigan Consumer Sentiment is due out on Friday.
Source; http://www.goldalert.com/
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