Gold Price Rises on Worrisome Global Economic Data

GOLD PRICE NEWS – The gold price held firm Thursday morning amid modest weakness in the U.S. dollar and disappointing economic data in several of the world’s largest regions.  The spot price of gold climbed to as high as $1,577.49 per ounce in overnight trading as the U.S. Dollar Index hit an intra-day low of 81.841, but pared its gains as the greenback rebounded somewhat.  The SPDR Gold Trust (GLD), a proxy for the gold price and the world’s largest gold ETF, advanced $0.74 to $152.36 per share.

Silver turned higher in concert with the price of gold this morning, rising $0.40, or 1.5%, to $28.29 per ounce.  Among other precious metals, platinum futures rose 1.2% to $1,430.80 per ounce while palladium added 1.1% to $597.70 per ounce.  As for cyclical commodities, copper futures advanced 0.9% to $3.43 per pound and crude oil climbed 1.1% to $90.89 per barrel.

Gold shares moved into the black alongside the gold price as well, with the Market Vectors Gold Miners ETF (GDX) rising $0.21, or 0.5%, to $44.65 per share.  Today’s modest advance followed yesterday’s large positive reversal that saw the GDX finish 7.6% above its intra-day low.  Notable gold producers posting gains this morning included Yamana Gold (AUY) and Newmont Mining (NEM) – which jumped by 1.4% to $14.69 and by 0.7% to $48.90 per share, respectively.

Gold equities outperformed the broader markets this morning, as the S&P 500 Index hovered near unchanged at 1,318.45 after two key U.S. economic reports.  Weekly jobless claims came in at 370,000, in-line with the consensus estimate among economists.  Durable goods orders rose 0.2%, below the 0.5% increase economists were expecting.  Furthermore, excluding transportation orders, the durable goods figure declined 0.6%, well below the 0.8% rise expected.

The gold price also received a boost from worse than expected economic data in China and the euro zone.   The preliminary Chinese Purchasing Managers Index (PMI) – a key gauge of manufacturing activity – fell to 48.7 in May from a final reading of 49.3 in April, fueling worries that the Chinese economy could slow further.  The euro zone composite PMI fell from 46.7 in April to 45.9 in May, its lowest reading since June 2009.

Although the European data missed expectations, the euro currency inched higher by 0.1% to 1.2588 against the U.S. dollar.  Commenting on the action in currencies and the gold price, Credit Suisse analyst Tom Kendall stated that “The correlation with euro/dollar is quite strong at the moment. Today we’ve seen the euro come back off its immediate lows … and that has helped the precious metals get a bid again.”

The Credit Suisse analyst went on to say that “On balance, I still think $1,600 is more likely than $1,500, although that view was looking a little shaky yesterday … that is how quickly this market can shift around.”