GOLD PRICE NEWS – The gold price tumbled $24.45, or 1.5%, to $1,582.77 per ounce on Thursday in the aftermath of yesterday’s Fed meeting. There, the Ben Bernanke-led central bank decided not to launch a third round of quantitative easing (QE3), which provided a headwind for the yellow metal and assets linked to the price of gold. A stronger U.S. dollar also put pressure on the gold price this morning, as the greenback rose 0.6% against a composite of foreign currencies.
Several weaker than expected U.S. economic reports were insufficient to prop up the price of gold this morning. Weekly jobless claims came in at 387,000, above the 380,000 consensus estimate among economists. The Philadelphia Fed Index fell to negative 16.6 versus the unchanged level markets were expecting. Lastly, existing home sales in May declined to a seasonally adjusted annual rate of 4.55 million from 4.62 million in April, and below the 4.57 million figure economists were forecasting.
Silver was not immune to the sell-off, as it retreated $0.67, or 2.4%, to $27.44 per ounce. In doing so, gold’s sister precious metal returned to negative territory on a year-to-date basis, by 1.0%. In contrast, the spot gold price remained higher by 1.2% in 2012 in spite today’s weakness.
Gold shares headed south in concert with the price of gold this morning as well, with the Market Vectors Gold Miners ETF (GDX) down by $1.17, or 2.5%, at $46.10 per share. With the move lower, the GDX extended its year-to-date loss to 10.4%. Notable gold miners in the red today included Gold Fields (GFI), Goldcorp (GG), and Randgold Resources (GOLD). GFI fell by 2.6% to $13.36, GG by 2.2% to $37.98, and GOLD by 2.6% to $91.84 per share.
Although the Federal Reserve decided yesterday to extend Operation Twist through the end of the year, it chose not to expand its balance sheet further. The move came despite the fact that Ben Bernanke and his fellow central bankers lowered their GDP estimates and raised their unemployment rate forecasts for the U.S. economy. In addition, the Fed did not extend the timeframe for its near-zero Fed Funds rate from late 2014, as some economists had predicted.
As for the gold price, Saxo Bank vice president Ole Hansen wrote in a note to clients that “Currently we’re seeing a bit of follow-through from disappointed investors, but believe we should be finding support pretty soon… Overall I think the market is not ready to let go of gold, as it still looks like one of the better bets should the economic outlook continue to deteriorate.”
Jan Hatzius, chief U.S. economist at Goldman Sachs, also noted that the FOMC statement was more dovish than at the prior meeting. The Fed “put in place more clear easing bias in the statement,” Hatzius stated.
The Goldman economist went on to say that “The concluding sentence now says that the FOMC ‘is prepared to take further action’, whereas previously the statement said that the committee would ‘regularly review the size and composition of its securities holdings’. Fed officials also added that promoting a ‘sustained improvement in labor market conditions’ could be justification for easing (in addition to promoting ‘a stronger economic recovery’).”