Gold prices remain mired in a trading range as investors weigh the negative impact on the yellow metal of the end of the Fed’s second round of quantitative easing. Today, June 30, is the official end of QE2, a $600 billion asset purchase program designed to keep interest rates low and stimulate the economy.
On Wednesday, the gold price climbed $9.72 to $1,511.02 per ounce amid U.S. dollar weakness and widespread gains in commodities. The SPDR Gold Trust (GLD), a proxy for the price of gold, settled higher by $0.94 at $147.18 per share. Strength in the price of gold and the U.S. dollar’s slide were fueled by the approval of a $112 billion austerity package by the Greek parliament. Following the vote, the euro rose 0.5% to 1.4437 against the dollar and asset prices rose across the board.
Silver traded near unchanged Thursday after yesterday’s 2.8% bounce that took gold’s sister precious metal to just under $35 per ounce. Gold and silver equities continued their stretch of recent gains as the Philadelphia Gold & Silver Index (XAU) jumped 2.1% to 199.44. In doing so, the XAU extended its weekly gain to 3.9%, putting it on pace for its best week since a 4.6% climb from May 24-27. Notable advancers included Barrick Gold (ABX) and Kinross Gold (KGC), with gains of 2.7% and 2.3%, respectively.
The price of gold posted its largest single-day gain yesteday since a 0.6% rise on May 27. The fact that a relatively small gain was the largest in five weeks speaks to the substantial selling pressure present over the past month in the gold market. Despite the recent weakness, the gold price remains within 4.2% of its $1,577.40 all-time record high, reached on May 2.
Looking ahead, several market strategists see the gold price consolidating during the summer, prior to another leg higher in the fall. Barclays Capital analyst Yingxi Yu wrote in a note to clients that “There are still reasons to buy gold, but just not any new reason for now. Market participants are generally positive on gold, but it is a question whether now is the right time to enter the market given the volatility in risky assets such as equities and oil in particular.”
HSBC analyst James Steel commented that “The gold market may not have dropped enough to invite substantial emerging market and safe haven buying to emerge. Longer term, we remain bullish. The strength of the CHF (Swiss Franc) shows there is still plenty of nervous safe haven buying that could easily shift into gold.”
Heading into the July 4 holiday weekend, there are several upcoming data points on the financial calendar that could serve as catalysts for the gold price. In addition to the ongoing economic uncertainty in Greece and across Europe, a slew of data is set to be released in coming days. The Chicago Purchasing Managers Index (PMI), a key manufacturing gauge, will be released on Thursday and Friday brings the University of Michigan Consumer Sentiment, the ISM Index, and reports on construction spending and automobile sales.
If the economic reports paint a picture of further economic softening, the gold price is likely to remain well supported, while better than expected data could provide a headwind for the yellow metal.
Source: http://www.goldalert.com/2011/06/gold-price-steady-at-1510-on-weak-jobless-claims/
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