Gold Price Awaits Fed, Bernanke and QE3 Decision

GOLD PRICE NEWS – The gold price continued to consolidate near $1,735 per ounce on Thursday ahead of today’s much-anticipated Federal Reserve meeting.  The stability in the price of gold coincided with tepid movements in the currency markets, as the U.S. Dollar Index dipped 0.1% to 79.664 and the euro held near unchanged against the dollar at 1.2896.

Silver fared worse than the gold price this morning, as it fell $0.19, or 0.6%, to $33.08 per ounce.  While silver has experienced more volatility than the yellow metal in recent weeks, it has also consolidated this week between the $33 and $34 levels.

Gold shares also lagged the price of gold on Thursday, as the Market Vectors Gold Miners ETF (GDX) slid $0.25, or 0.5%, to $49.76 per share.  Following five straight weekly advances, the GDX has stabilized thus far this week as investors await the Fed’s next monetary policy decision.  This morning, notable gold stocks in the red included Gold Fields (GFI), Kinross Gold (KGC), and Newmont Mining (NEM).  GFI dropped by 1.3% to $12.15, KGC by 0.8% to $9.48, and NEM by 0.7% to $52.18 per share.

This afternoon all eyes will be on the U.S. central bank, and Chairman Ben Bernanke in particular, as the Fed decides on whether or not to launch a third round of quantitative easing (QE3).  While there is a variety of opinion on the likelihood of QE3, most economists expect the Fed to at minimum deliver a more dovish statement.  Wells Fargo’s chief economists, John Silva, wrote in a note to clients that it appears to be a “done deal” that the Fed will extend the time horizon for the near-zero Federal funds rate to 2015.

As for the gold price, HSBC analyst James Steel said that “The way these markets have been trading, both the financial markets and gold, it looks as if we would have to get a statement that went beyond expectations for the gold market to react strongly…If we don’t get anything at all, I think the sell-off might be fast-paced, but could be limited.”

“We still might see a mild amount of profit-taking, but…gold has still shown a fairly firm tone, so I’m not sure we can really expect the heavy amount of liquidiation on disappointing Fed statements that we have seen previously,” Steel added.

Simon Weeks, head of precious metals sales at Scotia Mocatta, contended that “With a pullback in dollar terms and on the crosses there better be some good news from the FOMC for the bulls, as the (gold) market is looking a bit heavy.”

From a technical perspective, Weeks noted that “Following the failure at $1,745 yesterday we could end up back at $1,700 if they don’t get what they had hoped for. On the other hand, if the market can get back over the $1,745/1,750 area then there is room to $1,790.”