Gold Price Steady, Eyes Upcoming Euro Meetings, Fed Minutes

GOLD PRICE NEWS – The gold price held steady near $1,585 per ounce on Monday as the yellow metal consolidated following last week’s 0.9% decline.  The price of gold stabilized alongside the U.S. Dollar Index this morning, which inched lower by 0.1% to 83.292.  In recent weeks, gold prices have fallen back toward the midpoint of the $1,540-$1,620 trading range that they have occupied since early May.

Last Friday the gold price fell over $20 despite the worse than expected U.S. employment report.  While the non-farm payrolls data came in below economists’ estimates, the general consensus among investors was that the jobs report was not disappointing enough to meaningfully increase the odds of a third round of quantitative easing (QE3) by the Federal Reserve.

While the United States’ central bank may not be implementing further easing measures in the near future, several others around the world announced additional monetary stimulus programs last week.  This past Thursday, the Peoples’ Bank of China (PBOC) unexpectedly cut interest rates, the Bank of England expanded its quantitative easing program by 50 billion pounds, and the European Central Bank (ECB) reduced its benchmark interest rate to a new record-low of 0.75%.

Silver outperformed the yellow metal this morning, rising by $0.25, or 0.9%, to $27.40 per ounce.  In contrast to the metals, shares of most gold and silver producers headed south.  The Philadelphia Gold & Silver Index (XAU) slipped 1.0% to 155.80, while Barrick Gold (ABX) – the XAU ‘s largest component – declined by 1.4% to $36.35 per share.  Among silver stocks, Pan American Silver (PAAS) was one the main laggards, as it tumbled 5.7% to $14.90 per share.

Commenting on the outlook for gold prices and the global economy, Daniel Smith – an analyst with Standard Chartered – stated that “The main thing that says to me is when inflation is poor, it encourages China to cut rates and stimulate the economy and I see that as good news for risk appetite…Gold carries the idea that it’s a safe-haven, but in reality when everything else moves up, when liquidity improves, it tends to lift everything at the same time.”

Looking to the week ahead, the U.S. economic calendar is relatively light, but does include a few key items.  The Fed minutes – a recap of the latest Federal Open Market Committee (FOMC) meeting – will be released on Wednesday afternoon, followed by weekly jobless claims on Thursday.  The week then concludes on Friday with reports on the Producer Price Index (PPI) and University of Michigan Consumer Sentiment Index.

Across the Atlantic, euro zone finance ministers are scheduled to meet today to flesh out details of the recently-announced Spanish bailout.  Additionally, the European Union will hold a summit for its 27-member nations on Tuesday in the hopes of further solidifying next steps in its efforts to combat the sovereign debt crisis.

Strategists at BNP Paribas, however, remained skeptical that the euro meetings will produce any meaningfully positive solutions.  “There is a risk, in our view, that a decision will not be reached on Monay on all the pending issues and that an extra meeting…will be needed,” BNP wrote in a note to clients.  “The markets could see this as an invitation to test the willingness of creditor countries to really step in and support the peripheral countries.”

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