Gold Price Nears $1,800 amid ECB Meeting, Fed Minutes

GOLD PRICE NEWS – The gold price climbed to within inches of $1,800 per ounce on Thursday in the aftermath of monthly monetary policy meetings by the European Central Bank (ECB) and Bank of England (BOE).  The spot price of gold rose as much as $18.34, or 1.0%, to $1,797.64, its highest level since November 9th of last year.  In doing so, the gold price extended its 2012 gain to 15.0% as the yellow metal remains on pace for its 12th consecutive annual advance.

Silver moved up alongside the price of gold today, by as much as $0.57, or 1.6%, to $35.17 per ounce.  The rally in precious metals coincided with strength in the broader commodity markets and weakness in the U.S. dollar.  Crude oil futures surged 4.1% to $91.73 per barrel, while the U.S. Dollar Index fell 0.8% to 79.362.  The euro currency fared particularly well against the greenback, as it added 0.9% to 1.3018.

Gold stocks headed north in conjunction with the gold price and the broader equity markets.  The Market Vectors Gold Miners ETF (GDX) climbed $1.53, or 2.9%, to $54.25 per share while the S&P 500 Index added 0.7% to 1,460.94.  Within the gold sector, two of the best performing large-cap mining companies were IAMGOLD (IAG) and Kinross Gold (KGC) – which advanced by 3.3% to $16.27 and by 7.0% to $11.16 per share, respectively.

ECB President Mario Draghi was responsible for a portion of the gold price rally this morning, after he reiterated the central bank’s commitment to preserving the euro currency.  Specifically, the ECB held its benchmark interest rate at an all-time low of 0.75% and noted that it stands ready to purchase the bonds of euro zone nations such as Spain and Italy.  However, these nations have yet to request financial assistance due to the looming threat of significantly greater oversight into the countries’ finances.

The Bank of England also maintained its set of accommodative monetary policies on Thursday, which included keeping its £375 billion quantitative easing program in place.  The central bank’s current asset purchase is scheduled to end next month, although many economists believe the BOE will decide to extend it at that time.

Commenting on the implications of the central bank meetings for gold prices, RBC Wealth Management precious metals strategist George Gero wrote in a note to clients that “Bank of England rate decision of low rates and continued low rates here are also helpful to those needing gold to maintain purchasing power. We now approach the 1800 area which we look at as resistance and possible breakout if we close above.”

In the U.S., the price of gold showed a muted response to the latest Federal Reserve minutes.  The recap of last month’s Federal Open Market Committee (FOMC) meeting contained few items of which the markets were not already aware, mainly tied to QE3.

However, the Fed minutes provided more detail on the factors that influenced the central bank’s decision to launch an open-ended asset purchase program.  In particular, the minutes pointed out that “Members generally judged that without additional policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.”