GOLD PRICE NEWS – The gold price retreated $18.25, or 1.1%, to $1,631.97 per ounce Thursday morning amid U.S. dollar strength and widespread liquidation in the commodities complex. With the sell-off, the price of gold reached its lowest level since January 15 and cut its year-to-date gain to just 4.4%. Silver dropped alongside the gold price, by $0.74, or 2.3%, to $31.44 per ounce.
Financial markets across the globe declined after the latest reading on manufacturing activity in China – the purchasing managers’ index (PMI) for March – fell to 48.1. In doing so, Chinese PMI came in below the 50 level – separating expansion from contraction – for the fifth straight month, the longest stretch since March 2009.
On Wednesday the gold price traded between $1,640 and $1,660 per ounce for the sixth consecutive session, before settling fractionally higher at $1,650.22 per ounce. The price of gold oscillated between gains and losses amid a relatively quiet day on Wall Street. While the gold price stabilized, the U.S. dollar inched higher against a basket of the world’s most liquid currencies.
Silver posted a slight gain alongside the gold price yesterday, rising 0.2% to $32.18 per ounce. Since tumbling from near $37 in late February to below $33 in early March, silver has largely consolidated between the $32 and $33 levels in recent weeks. On a month-to-date basis, the price of gold and silver are now lower by 3.6% and 10.3%, respectively.
Gold shares continued to languish on Wednesday, with the Market Vectors Gold Miners ETF (GDX) dipping 0.3% to $49.73 per share. Since March 1st the GDX has fallen by 10.0%, and by 3.1% in 2012. Notable decliners yesterday included Agnico-Eagle Mines (AEM) and Newmont Mining (NEM). AEM slipped 1.4% to $33.10 per share while NEM retreated 1.0% to $53.17 per share.
The broader U.S. equity markets held steady as well yesterday, with the S&P 500 Index holding near a multi-year high above 1,400. Concurrent with the markets’ stability has been a further decline in investor risk aversion, as evidenced by the CBOE Volatility Index (VIX) dropping 2.9% to 15.13. The less nervous environment has prompted investors to sell investments tied to the gold price – generally viewed as safe havens – in favor of cyclically-sensitive stocks and commodities.
Deutsche Bank analyst Daniel Brebner attributed the recent gold price weakness to an improved outlook for the U.S. economy. In a note to clients, Brebner wrote that “For me, the market is starting to look at conditions as being more normal. Obviously, the evidence is the equity markets in particular and the S&P 500 … and the fact that we are in a bit of a pause on monetary policy.”
“Any of the big central bankers seem like they are stepping back a bit,” the Deutsche Bank analyst added. “Are conditions going to be more normal? Is the economy going to be able to operate without the support of ultra accommodative policy?…There is sufficient perception that maybe that could be in fact the case that we are seeing some pressure on the gold price.”
However, despite the shorter-term headwinds facing the yellow metal, Brebner predicted that the gold price will rebound modestly over the course of the year. Furthermore, he noted that Deutsche Bank recently reiterated its year-end gold price target of $1,825 per ounce.
Source; http://www.goldalert.com/2012/03/gold-price-retreats-markets-fall-on-weak-chinese-data/
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