Gold Prices Eke Out Gain for Week
Gold prices traded tentatively higher Friday as investors debated between the yellow metal and stocks as the Dow Jones Industrial Average rallied by triple digits during the day and the second-quarter gross domestic product reading came in better than expected.
Gold for December delivery closed up 20 cents to $1,237.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Friday has traded as high as $1,244.20 and as low as $1,233.50. The U.S. dollar index was up 0.04% at $82.93 while the euro was up slightly at $1.27 vs. the dollar. The spot gold price Friday was down slightly, according to Kitco’s gold index.
Gold prices spent the day in limbo as investors vacilated between stocks and gold. Second-quarter growth domestic product in the U.S. was revised down from 2.4% to 1.6% signaling a feeble U.S. recovery. Analysts were looking for a downward revision of 1.4% so the result was bad but not horrible. The news came on top of a struggling stock market, which closed Thursday below the psychologically important 10,000 level for the first time since July 6.
Gold prices had also been waiting for Federal Reserve Chairman Ben Bernanke’s speech at 10 a.m. EDT, which kicked off a two-day meeting of central bank leaders in Jackson Hole, Wyo. This was the first time Bernanke has spoken since he called the economic outlook “unusually uncertain.” Bernanke confirmed worries that the U.S. economy was in trouble by saying the pace of recovery has been too slow and joblessness too high. Investors had been hoping for concrete signs of further money printing and quantitative easing in light of continuing disappointing economic data.
Two days after the Federal Reserve announced it would reinvest proceeds from maturing mortgage-backed securities into long-term government bonds in mid-August, gold prices surged double digits while the Dow sunk 3.5%. But for now Bernanke’s assurance that the Fed will provide additional stimulus to the economy, if needed, calmed investors and limited gold’s appeal as a safe haven asset.
Pumping more liquidity into the market could be seen as a sign of desperation and raise the threat of inflation. Although inflation is currently low — the core consumer price index rose just 0.1% in July — future money printing will debase the U.S. dollar and make gold even more appealing as a form of currency.
Jeffrey Christian, managing director of the CPM group, says he doesn’t “think Ben Bernanke will be able to say anything that will appease the investment community” for the long term.
With a dissatisfied Wall Street and gold prices up $9 for the week, Christian expects even more strength from the precious metal. “The fact that gold has gotten over $1,240 and is showing some stability there makes us think that the price could go up further and possibly even to $1,260 or so next week going into the Labor Day weekend,” he said.
Don Dion, portfolio manager of ETF Action, said on RealMoney Silver that “whether you’re worried about inflation, deflation or an economic apocalypse, there’s a reason to have exposure to a physically backed fund.” Dion likes the SPDR Gold Shares (GLD) , the gold exchange-traded fund, as do other investors. The GLD currently holds 1,297.84 tons. Shares were trading at $120.76.
Silver prices settled up 5 cents at $19.07 while copper closed 5 cents higher at $3.36. Silver has popped more than 5% this week. A lack of fundamental reasons have some analysts speculating that a big buyer has entered the market.
Gold mining stocks , a risky but profitable way to buy gold , were mixed. Freeport McMoRan Copper & Gold (FCX) was surging 5.93% to $71.09 while small cap NovaGold (NG) was adding 5.42% to $7. Other gold stocks New Gold (NGD) and Gold Fields (GFI) were trading at $6.18 and $14.20, respectively.
