Gold Price Rebounds after Fed President’s Dovish Remarks

GOLD PRICE NEWS – The gold price bounced back on Tuesday from an overnight sell-off, rising from as low as $1,753.24 per ounce to $1,775.89 in morning trading.  The rebound in the price of gold did not coincide with weakness in the U.S. Dollar Index, however, as the greenback advanced 0.2% to 79.136 against a basket of foreign currencies.  The SPDR Gold Trust (GLD), the world’s largest gold ETF and gold price proxy, climbed $1.17, or 0.7%, to $171.57 per share this morning.

Silver turned higher alongside the gold price, jumping from $34.07 in overnight trading to as high as $35.10 per ounce.  In doing so, the price of silver reached its highest level since March 2nd and extended its year-to-date gain to 26.6%.  As for the price of gold, it stretched its ascent in 2012 to a far less but still respectable 13.6%.

In contrast to the precious metals, gold and silver stocks oscillated between gains and losses this morning.  The Philadelphia Gold & Silver Index (XAU), which has advanced for six consecutive weeks, held near unchanged at 191.67.  Notable XAU components in the black included IAMGOLD (IAG) and Silver Wheaton (SLW), which rose by 0.5% to $15.67 and by 0.6% to $39.15 per share, respectively.  On the downside, Barrick Gold (ABX) fell 0.4% to $42.01 share while Coeur d’Alene Mines (CDE) dipped 0.1% to $28.57 per share.

Since rallying to $1,780 per ounce last Friday in the aftermath of the Federal Reserve’s decision to launch a third round of quantitative easing (QE3), the gold price has been in consolidation mode as investors continue to assess the outlook for monetary policy in the U.S. and around the world.  VTB Capital analyst Andrey Kryuchenkov wrote in a note to clients that the yellow metal’s resiliency is based on the fact that it remains “bullish in the long run, given debasing of major fiat currencies, liquidity boosts, etc. Inflation concerns will resurface.”

Bayram Dincer, an analyst at LGT Capital Management, also offered positive commentary on the gold price.  Last week’s FOMC statement said that “even if we reach economic sustainability, central banks will keep interest rates low and monetary policy loose,” he noted.  “The forward-looking guidance of central banks is very favourable for real assets, because in that kind of scenario you have inflation-hedge and diversification benefits provided mainly by gold.”

The gold price also received a boost this morning from dovish remarks by Charles Evans, President of the Federal Reserve Bank of Chicago and a voting member of the FOMC.  Evans, one of the largest proponents of QE3 on the FOMC, stated in a speech this morning that “This was the time to act. With the problems we face and the potential dangers lying ahead, it is essential to do as much as we can now to bolster the resiliency and vibrancy of the economy. We cannot be complacent and assume that the economy is not being damaged if no action is taken.”

Evans went on to say that “Stating that we expect to keep a highly accommodative stance for policy for a considerable time after the recovery strengthens is an important reassurance to households and businesses that Fed policy will not tighten prematurely.”