Gold Price Reaches 4-Month High on Stimulus Expectations

GOLD PRICE NEWS – The gold price continued to rally on Thursday, reaching another multi-month high in the aftermath of yesterday’s Fed minutes.  The spot price of gold climbed $17.23, or 1.0%, to $1,672.28 per ounce – its highest level since April 13th – as the Federal Reserve reiterated its dovish stance on monetary policy.  Today’s gold price strength coincided with gains in other precious metals and commodities and modest weakness in the U.S. dollar.

Not to be outdone, silver added to its recent stretch of gains alongside the price of gold.  Silver jumped as much as $0.79, or 2.6%, to $30.68 per ounce – its best level since May 2nd.  With today’s rally in precious metals, the prices of gold and silver extended their advances in August to 3.6% and 9.7%, respectively.

Gold shares were buoyed by rising gold price, but their gains were muted by weakness in the broader equity markets.  The Market Vectors Gold Miners ETF (GDX) rose $0.13, or 0.3%, to $47.63 per share, while the S&P 500 Index slipped 0.4% to 1,407.51.  Despite only the small advance in gold stocks, the GDX stretched its gain in August to 11.3% – putting it on pace for its best month since April of 2010.

Within the gold sector, notable mining stocks in the black this morning included Goldcorp (GG), IAMGOLD (IAG), and Randgold Resources (GOLD).  GG climbed by 1.1% to $40.79, IAG by 1.9% to $13.16, and GOLD by 2.6% to $101.37 per share.

Yesterday afternoon, the gold price received a lift from the latest Fed minutes, a recap of last month’s FOMC meeting.  The Ben Bernanke-led central bank noted that “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.”  The minutes also stated that many central bankers believe that there is “substantial capacity” for additional asset purchases, i.e. quantitative easing.

Commenting on the Fed minutes and its implications for the price of gold, Chen Min – an analyst at Jinrui Futures in China – told Reuters that  ”The Fed’s tone is totally different in the minutes from previous comments, and that helped gold break from the previous range and move into a higher price range ahead of the peak consumption season.”

Dan Greenhaus, chief global strategist at BTIG, echoed Min’s sentiments on the outlook for monetary policy.  In a note to clients, Greenhaus wrote that “If there was any doubt about how close the FOMC is to easing, the minutes to the most recent meeting should dispel those concerns.  According to the minutes, one member said additional accommodation would not improve the outlook.  One.”