Gold Price Stabilizes, Awaits Fed Minutes

GOLD PRICE NEWS – The gold price held firm near $1,575 per ounce on Wednesday amid modest weakness in the U.S. dollar.  Following yesterday’s 1.2% sell-off, the price of gold recouped a small portion of its losses ahead of the release of this afternoon’s Fed minutes.  The SPDR Gold Trust (GLD), the world’s largest gold ETF and a proxy for the gold price, advanced $1.15, or 0.8%, to $153.30 per share in morning trading.

Silver posted a moderate gain alongside the price of gold, as it climbed $0.15, or 0.5%, to $27.04 per ounce.  Nonetheless, silver remained near its lowest level of the year and down by 2.5% in 2012.  Silver has also continued to underperform the gold price in recent months, as the yellow metal remained fractionally higher, by 0.7%, on a year-to-date basis.

Gold shares as a whole were unable to gain any traction despite this morning’s rise in the price of gold.  The Market Vectors Gold Miners ETF (GDX) fell $0.54, or 1.3%, to $42.33 per share.  The sector was dealt a significant blow in the form of a disappointing production forecast from Goldcorp (GG), the second largest component of the GDX.  Shares of GG plunged as much as 9.7% to $33.17 after the Canadian-based gold producer lowered its full-year 2012 gold production outlook from 2.6 million ounces to 2.35-2.45 million.  Goldcorp also raised its cash cost guidance from $250-$275 to $310-$340 per ounce.

As for the broader equity markets, they oscillated between gains and losses as investors awaited the Fed minutes later today.  The Dow Jones Industrial Average (DJIA) ticked down by 17.98 points, or 0.1%, to 12,635.10 while the S&P 500 Index inched higher by 1.10 points, or 0.1%, to 1,342.57.  European markets were mixed as well, with the German DAX up by 0.4% and the French CAC down by 0.3%.  In currencies, the euro rose 0.2% to 1.2277 against the U.S. dollar.

With the Fed minutes approaching, Commerzbank analyst Daniel Briesemann wrote in a report to clients that the chance of getting a considerably more negative economic outlook from the Federal Reserve was relatively small, and that the gold price is unlikely to have a strong reaction to the news this afternoon.

“The dollar is the major influence on the price of gold at the moment, it is the reason gold is up today,” Briesemann added.  “I don’t think the FOMC minutes will have an effect at all. The Fed have already stated their fears about the global economy and at the last FOMC meeting, they already highlighted (that).”

Looking ahead, Briesemann stated that “We expect higher gold prices towards the end of year, but in the shorter term, and because gold is not behaving like a safe-haven and is trading more in line with risk assets like cyclical commodities, I see more risk to the downside at the moment.”