GOLD PRICE NEWS – The gold price powered higher Monday morning, rising $15.00 to $1,433.90 per ounce. The price of gold is now less than 1% from its all-time high of $1,445 per ounce posted earlier this month. News that U.S. and European military forces launched an aerial assault on Libya gave a boost to gold and the rest of the precious metals. Similar to gold, silver is moving back toward its record highs, gaining over 2% this morning to $36.03 per ounce. Silver prices touched $36.75 on March 7.
Gold prices have risen over $30 in just the past two trading sessions, buoyed by strong investment demand. Helping to drive the recent surge in investment demand was a bullish report from Goldman Sachs released last Friday. David Greely, a Commodities Research analyst at the firm, predicted the gold price will reach $1,480 within the next three months. Goldman’s report highlighted the decline in real U.S. interest rates and renewed risk aversion stemming from the nuclear crisis in Japan and the ongoing turmoil in the Middle East and North Africa as the chief catalysts for what would be fresh record highs in the gold price.
Greely attributed gold’s mid-month weakness to broad-based liquidation due to financial market calamity in Japan, rather than any fundamental headwind to the gold price itself. Moreover, the rally in U.S. Treasuries and drop in real interest rates that coincided with the Japanese crisis creates an even stronger environment for the gold price.
The Goldman analyst characterized the sell-off as a retracement that offered investors “a good buying opportunity” in the yellow metal. In addition, he described the recent weakness as “overdone” and forecasted that “the combination of the flight to safety in asset markets in the aftermath of the Japanese earthquake as well as the continued contagion risk in the Middle East to point to sharply higher gold prices in the near term.”
The report went on to discuss another positive catalyst for the gold price – monetary demand from gold ETFs and central banks around the world. Greely noted that as of December 2010, gold holdings by central banks increased for 21 straight months, fueled by purchases from both emerging and developed economies. “While monetary gold demand has historically been centered in developed western economies,” Greely wrote, “the recent shift in EM central bank positioning and its impact on global central bank gold holdings highlights the rising importance of EM gold demand to the gold balance.”
As for gold ETFS, Greely pointed to the recent launch of a fund in China, which is designed to invest in shares of gold ETFs traded in the United States, Europe and Japan. The launch highlighted a growing interest in securities that offer gold price exposure. Although the $483 million raised would only add 0.35 million troy ounces to gold ETF holdings, Greely contended that “we see this as a major development as it constitutes the largest Qualified Domestic Institutional Investor (QDII) fund launch in China in three years, after just a month of fund raising.”
The share prices of gold mining producers and explorers rallied this morning on the back of higher gold prices and a more positive tone in global equity markets. Large-cap gold companies gained, on average, 2% heading into the opening bell on Wall Street. The world’s largest producer, Barrick Gold (ABX), led the way higher, rising $1.05 to $50.45 per share. Gold ETFs also advanced with the SPDR Gold Trust (GLD) higher by $1.42 at $139.79.
(Source: http://www.goldalert.com/2011/03/gold-price-within-1-of-record-high/)
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