GOLD PRICE NEWS – The gold price inched higher on Tuesday amid further weakness in the U.S. dollar and strength in the commodities complex. The spot price of gold climbed to a high of $1,621.12 per ounce earlier this morning, but pared its gains as the dollar recouped a portion of its losses against a composite of foreign currencies. The euro rose 0.2% to 1.2421 against the greenback as the recent stretch of gains in European financial markets continued.
While the gold price stabilized near unchanged at $1,612.37 per ounce, silver rose by $0.10, or 0.4%, to $28.06 per ounce. Among other precious metals, platinum futures rose 0.7% to $1,411.10 per ounce while palladium jumped 1.2% to $586.75 per ounce. As for cyclical commodities, copper futures added 1.4% to $3.44 per pound and crude oil moved up by 0.6% to $92.75 per barrel.
Gold shares advanced alongside the price of gold for the third consecutive trading day, as the Market Vectors Gold Miners ETF (GDX) rose $0.24, or 0.5%, to $43.97 per share. In doing so, the GDX stretched its gain thus far in August to 2.8% – putting it on pace for its best month since January of this year. Notable gold stocks in the black this morning included Eldorado Gold (EGO), Goldcorp (GG), and Kinross Gold (KGC). EGO added 3.4% to $11.44, GG 1.8% to $36.96, and KGC 0.9% to $7.82 per share.
David Wilson, Director of Metals Research and Strategy at Citigroup, wrote in a note to clients that with regard to the gold price, “It’s all about the exchange rates. We’ve had a slightly softer dollar, and that’s been supportive.”
“Every so often we get some more optimism that Europe is sorting out its problems, as we did over the second half of last week, but I don’t think this (strength) will continue,” Wilson added. “For that, we really need to see a significantly softer dollar, and that won’t happen until the Fed takes action.”
While the Ben Bernanke-led Federal Reserve disappointed some investors by not announcing a third round of quantitative easing (QE3) at last week’s FOMC meeting, another U.S. central banker provided dovish commentary this morning. Eric Rosengren, President of the Federal Reserve Bank of Boston, called for the Fed to launch an “open-ended” asset purchase program to provide stimulus for the U.S. economy.
“What I would argue for actually is to have it open-ended, that we focus on economic outcomes,” Rosengren stated in a CNBC interview. “It would be setting a quantity that you’re going to continue to buy until you get the economic outcomes that you want.”
Rosengren went on to say that that “There are a number of areas where quantitative easing can help,” he said. “One, it does push up asset prices. … A second area is the housing market.”
While GoldAlert has noted on several occasions that the positive effects of money printing on stock prices is transitory at best, the impact on gold prices has been far more substantial. While the S&P 500 Index remains well below its all-time high reached in 2007, the price of gold has set a series of new record highs in recent years.
As for Rosengren’s claim that further quantitative easing will help the housing market, there is little evidence to suggest that is the case. The U.S. housing market remains in the doldrums in spite of multiple rounds of QE, due in large part to the fact that record-low interest rates have not remedied the underlying problem of a significant glut in the supply of homes for sale. Unfortunately, the U.S. central bank has few, if any other options left in its toolbox besides recklessly firing up the printing presses yet again.
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