Gold Price Stabilizes, Silver Dips after Yesterday’s Sell-Off

GOLD PRICE NEWS – The gold price stabilized on Friday morning near $1,565 per ounce following yesterday’s $40 sell-off amid widespread liquidation in financial markets.  Thursday’s 2.5% decline marked the worst day for the price of gold since February 29th and erased its entire year-to-date gain.  For the week, the gold price is now lower by 3.8%, putting it on pace for its worst week since September of last year.

This morning, the gold price was unable to claw back any of the prior day’s losses, despite slight weakness in the U.S. dollar.  Silver fared worse than the yellow metal, as it dipped $0.10, or 0.4%, to $26.86 per ounce.  Thus far in 2012, silver is now down by 3.1%.  Furthermore, the gold/silver ratio – a measure of economic stress – currently stands at 58.3, its highest level since October 2010.

Gold shares rebounded modestly on Friday alongside the broader equity markets, as the Market Vectors Gold Miners ETF (GDX) rose $0.21, or 0.5%, to $45.03 per share.  Two of the best performing stocks this morning were Agnico-Eagle Mines (AEM) and Eldorado Gold (EGO).  AEM advanced by 1.4% to $40.79 and EGO by 1.6% to $12.44 per share.

The S&P 500 Index – which yesterday suffered its second-largest decline of the year – climbed 0.4% to 1,330.90.  U.S. equities turned higher after most Asian and European markets posted considerably smaller losses in overnight trading than their American counterparts.    However, reports surfaced this morning that Spanish Finance Minister, Luis de Guindos, confirmed that the country will formally request aid for its banking system on Monday.

Meanwhile, German Prime Minister Angela Merkel is meeting today with leaders from France, Italy, and Spain in Rome to discuss next steps in dealing with the sovereign debt crisis.  At a meeting of euro zone finance ministers yesterday in Luxembourg, Christine Lagarde – the head of the International Monetary Fund (IMF) – warned that the euro was under “acute stress” and urged leaders to consider additional measures to alleviate the crisis, including jointly issuing debt.

As for the gold price, Natixis analyst Nic Brown noted on Friday that “Since August, September, gold has been trading like any other commodity.  The one thing that will support prices this year is the potential for further aggressive monetary stimulus in the United States, whether it is QE or a new policy.”

Although the Federal Reserve did not launch a third quantitative easing program (QE3) this past week, Brown asserted in a note to clients that “The Fed may be forced into doing something.  The fundamentals in the U.S. may be improving … but the European situation is managing to drag everyone else down with it.”

Analysts at ScotiaMocatta offered their take this morning on the technical action in the gold market.  “The price action looks weak, but overall the metal has been contained in this 1528 to 1640 range for two months,” the firm noted. “A break of 1523, the December low, would see liquidation looking for a bigger move.”