Gold Prices Consolidate Ahead of Fed Meeting, German Court Ruling

GOLD PRICE NEWS – The price of gold fell slightly on Monday amid profit-taking following three straight weekly advances.  The spot gold price dipped $6.30, or 0.4%, to $1,730.80 per ounce in morning trading, after reaching a six-month high of $1,745.32 last Friday.  Today’s modest weakness in gold prices coincided with a small rise in the U.S. dollar, which had dropped to a four-month low last week against a basket of foreign currencies.

Silver inched lower alongside the price of gold this morning, by $0.10, or 0.3%, to $33.58 per ounce.  However, gold’s sister precious metal is also coming off of three consecutive weeks of gains and last evening reached its own six-month high of $34.02.  With the recent strength in precious metals, the prices of gold and silver are now up by 10.6% and 21.1%, respectively, on a year-to-date basis.

Gold shares headed slightly lower in concert with the gold price, as the Market Vectors Gold Miners ETF (GDX) slid $0.25, or 0.5%, to $50.21 per share.  Nonetheless, the sector has rebounded significantly over the past month and the GDX is riding a five-week winning streak.  This morning, notable gold stocks in the red included Agnico-Eagle Mines (AEM), Goldcorp (GG), and Harmony Gold (HMY).  AEM fell by 1.0% to $48.94, GG by 0.6% to $42.75, and HMY by 2.2% to $8.82 per share.

Gold prices have surged higher over the past month as the prospects for further monetary easing in Europe and the United States have risen considerably.  Last week, the European Central Bank (ECB) announced plans for an unlimited bond-buying program aimed at lowering interest rates on Spanish and Italian debt.  In the U.S., last Friday’s dismal jobs data led to increased speculation that the Federal Reserve will launch a third round of quantitative easing (QE3) in the near future.

Looking ahead, investors will soon find out if Fed Chairman Ben Bernanke and the FOMC will announce QE3 at this Thursday’s Fed meeting.  Across the Atlantic, on Wednesday the German Federal Constitutional Court will rule on the viability of the European Stability Mechanism (ESM) – the proposed permanent financial assistance program aimed at combating the euro zone sovereign debt crisis.

Commenting on the outlook for the price of gold, Barclays Capital wrote in a report to clients that “Our economists now expect the Fed to ease further at this week’s FOMC meeting, providing gold the catalyst it requires to test fresh highs for this year over the coming weeks.”

Analysts at Commerzbank echoed that sentiment, noting that “The latest price rally has been driven mainly by hopes that central banks will implement monetary easing measures…[QE3] is likely to spark higher inflation in the medium to long term [and] lead to fears of depreciation of key trading currencies.”

“This should benefit gold as a store of value and as an alternative currency,” Commerzbank added.  “We are therefore convinced that the gold price will continue to climb.”