Gold Prices Steady, to Remain “Range Bound” This Summer?

GOLD PRICE NEWS – Gold prices held firm near $1,575 per ounce Wednesday morning despite two better than expected reports on different sectors of the U.S. economy.  The spot price of gold fell to as low as $1,563.42 in overnight trading, but bounced back toward unchanged as U.S. equity markets opened.  The SPDR Gold Trust (GLD), the world’s largest gold ETF and a proxy for the gold price, inched higher by $0.17 to $152.79 per share this morning.

Silver stabilized alongside the gold price on Wednesday, as it held near the flatline at $27.15 per ounce.  In contrast to the precious metals, the Philadelphia Gold & Silver Index (XAU) fell 1.4% to 153.43.  Notable decliners included XAU components Gold Fields (GFI), Randgold Resources (GOLD), and Silver Wheaton (SLW).  GFI dropped by 1.8% to $12.56, GOLD by 1.0% to $89.03, and SLW by 0.9% to $26.01 per share.

As for the broader markets, the S&P 500 Index climbed 0.8% to 1,329.99 following the encouraging economic data.  Equity markets in Europe were higher across the board as well, with the German DAX up by 1.2% at 6,207.14 and the French CAC by 1.3% at 3,052.30.

Today’s U.S. pending home sales report picked up on the positive momentum yesterday from the Case-Shiller home price data.  With a 5.9% month-over-month rises, pending home sales easily surpassed the 1.5% consensus estimate among economists.  In addition to the encouraging housing market data, durable goods for May showed an increase of 1.1%, above the 0.5% level economists were expecting.

In spite of the positive data, gold prices continued to consolidate following last week’s sell-off.  The yellow metal appears to be looking ahead to the two-day European Summit that begins tomorrow.  There, euro zone policymakers are expected to discuss the escalating economic turmoil in Spain and Italy and additional measures to combat the sovereign debt crisis, among other items.

Looking ahead, several analysts expect the price of gold to remain relatively stable through the summer.  Deutsche Bank analyst Daniel Brebner wrote in a recent note to clients that “I don’t think there’s any kind of catalyst near term for a significant rebound in gold prices.  That said, I think we’ll continue to see very steady buying by central banks, which have been in the market for the last couple of quarters or so. That should help gold prices from weakening too much.”

ScotiaMocatta’s Simon Weeks commented yesterday that “Gold’s reaction to the FOMC et al was nasty but appropriate, indeed a classic case of ‘buy the rumour, sell the fact’ although the fact that we held above $1550 and more importantly $1540 will give the bulls some hope that all is not lost…In the big scheme of things and whilst acknowledging the potential for headline driven events remains high we continue to look very range bound to me with a $1550 – $1600 range likely to cover proceedings in the near future.”