Gold Prices Consolidate, Weigh Prospects for More Stimulus

GOLD PRICE NEWS – Gold prices continued to consolidate for a third straight session on Thursday amid another relatively quiet day on Wall Street.  The spot price of gold traded in a narrow range between $1,612 and $1,621 in overnight trading while the U.S. dollar advanced 0.3% against a composite of the world’s most-traded currencies.  The SPDR Gold Trust (GLD), the largest gold ETF, inched higher by $0.17 to $156.65 per share.

The stability in the gold price was matched by silver, which hovered near unchanged at $28.08 per ounce for the third consecutive day as well.  As for gold and silver shares, the Philadelphia Gold & Silver Index (XAU) climbed 0.9% to 156.88 – putting it on pace for its fourth daily advance in the past five.  Notable XAU components in the black included Yamana Gold (AUY), Randgold Resources (GOLD), and Silver Standard Resources (SSRI).  AUY rose by 2.0% to $15.29, GOLD by 3.0% to $97.57, and SSRI by 1.4% to $13.26 per share.

The broader equity markets oscillated between gains and losses alongside precious metals on Thursday, with the S&P 500 Index hugging the flatline near 1,403.64.  With the benchmark U.S. index hovering near three-month highs, investor risk aversion has turned sharply lower – as evidenced by the CBOE Volatility Index (VIX) sliding to as low as 15.27 yesterday.

The markets showed a muted response this morning to economic data out of China, which showed that the nation’s consumer inflation rate fell to 1.8% in July, its lowest level since January 2010.  The declining inflation rate fueled speculation that the People’s Bank of China (PBOC) could announce further interest rate cuts to help boost the nation’s slowing economy.

VTB Capital analyst Andrey Kryuchenkov commented that “Slowing output (in China), etc, suggest more stimulus ahead, which is supportive to the broader market.  As far as gold is concerned, we are simply sitting around the 10-day moving average, in very narrow trading over the past three sessions, waiting for a macro signal, with anaemic physical demand.  Should risk sentiment sink with a prolonged EUR/USD correction, we will be in for some pre-weekend profit taking.”

However, expectations of further stimulus are continuing to provide support for the gold price, according to Societe Generale analyst Robin Bhar.  “Gold seems to have gotten a foothold above the $1,600 level and seems to be relatively stable,” he asserted in a note to clients.  “People are expecting that the stimulus will be the kick that gold needs, and if it can vault $50, it can draw in more participation, and it could be at $1,700, $1,750. But that’s the caveat. We need more stimulus from central banks.”