Gold Price Firm, ECB Cuts Economic Forecast

GOLD PRICE NEWS – The gold price recovered from a modest decline earlier on Thursday, rising back above the $1,700 level after several key economic events in the U.S. and Europe.  The spot price of gold initially fell to as low as $1,687.15, but later reversed course to $1,704.87 per ounce.  The rebound in the gold price came despite further strength in the U.S. dollar, which advanced by 0.5% to a one-week high against a composite of foreign currencies.

Silver rallied in conjunction with the price of gold, from an intra-day low of $32.60 to as high as $33.33 per ounce.  Gold stocks climbed as well, with the Market Vectors Gold Miners ETF (GDX) jumping $0.46, or 1.0%, to $45.80 per share.  Two of the GDX’s best performing gold stocks were Harmony Gold (HMY) and Yamana Gold (AUY) – which rose by 1.9% to $7.64 and by 1.8% to $18.04 per share, respectively.

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Gold prices showed a muted reaction this morning to monetary policy decisions from the European Central Bank (ECB) and the Bank of England (BOE).  Both central banks chose to leave their benchmark interest rates unchanged, while the BOE also maintained its quantitative easing program at its current level of £375 billion.

While the ECB’s rate decision was predicted by most economists, its GDP forecast reduction was not.  ECB President Mario Draghi announced that the central bank would be lowering its 2013 GDP estimate to -0.9% from 0.3% and that “economic weakness in the euro zone is expected to extend into next year.”

Draghi added that the ECB’s “Governing Council continues to see downside risk to the economic outlook for the euro area…These are mainly related to uncertainties about the resolution of sovereign debt and governance issues in the euro area.”

Following the news in Europe, the euro currency dropped from as high as 1.3086 against the U.S. dollar into negative territory by 0.8% at 1.2963.

In the U.S., the price of gold was only minimally swayed by the latest weekly jobless claims data.  At 370,000, jobless claims came in below the 380,000 consensus estimate among economists.  Ryan Sweet, a senior economists at Moody’s Analytics, commented that “Claims are very choppy from the hurricane (Sandy) distortions working through the system…Businesses are nervous about the fiscal cliff but they are not in a panic. They are in a holding pattern.”

Looking ahead, tomorrow’s U.S. jobs report is likely to be the next significant catalyst for the price of gold.  Economists are expecting non-farm payrolls for November to come in at 86,000 and for the unemployment rate to remain at 7.9%.