Gold Price Slips, but Remains in “High Demand”

GOLD PRICE NEWS – The gold price turned modestly lower on Friday, giving back yesterday’s gain as the yellow metal remained in consolidation mode.  The spot price of gold climbed to an overnight high of $1,733.68 per ounce, but was unable to maintain its gains as the U.S. dollar recouped its losses against a basket of foreign currencies.  This morning, the gold price fell by as much as $8.94, or 0.5%, to $1,717.03 per ounce.

Silver underperformed the price of gold, sliding by $0.38, or 1.1%, to $33.89 per ounce.  Gold stocks fared slightly worse than the gold price, as the Market Vectors Gold Miners ETF (GDX) dropped by as much as 0.7% to $47.68 per share.  The Market Vectors Junior Gold Miners ETF (GDX) – comprised of small- and mid-cap precious metals companies – retreated by 1.6% to $21.54 per share.

Within the gold sector, notable decliners included GDX components IAMGOLD (IAG) and Kinross Gold (KGC).  Shares of IAG fell by 1.0% to $11.73 and KGC by 1.6% to $10.11.

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With today’s moderate weakness in the price of gold, the yellow metal is now on pace for a 1.9% weekly decline.  In doing so, the gold price is set to have alternated weekly gains and losses for the past five weeks.  During that time, the price of gold has settled into a trading range between approximately $1,680 and $1,750 per ounce.

Simon Weeks, head of precious metals at Scotia Mocatta, noted in a report to clients that “We’re back in the middle of a range. $1,750 is difficult to break…A weaker dollar is the key factor supporting the price, but gold has still not fully recovered from Wednesday’s (1.3%) selloff.”

Market strategists have attributed the gold price’s inability to break out of its trading range to a confluence of macroeconomic factors – including the U.S. fiscal cliff situation, the seemingly never-ending European sovereign debt crisis, slower economic growth and lower demand for gold in China, and movements in the U.S. dollar as a safe haven during times when markets shift into risk-off mode.

Nonetheless, the longer-term outlook for gold prices remains favorable, according to analysts at Commerzbank.  From an investment perspective, the firm contended that continued strong inflows of gold into exchange-traded funds (ETFs) is reflective of firm demand for the yellow metal.

“ETF investors, who are generally regarded as taking a longer-term view, are proof that gold remains in high demand as a store of value and a safe haven despite all the price fluctuations,” Commerzbank asserted.  The firm added that “We are confident that the gold price will continue to climb in 2013.”