Gold Price Spikes Higher after Weak U.S. Data

By Roger Baettig | January 17 2013 12:36 PM

Reuters

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GOLD PRICE NEWS – The gold price rebounded from an earlier sell-off on Thursday to reach a two-week high. The spot price of gold initially fell to $1,666.42 per ounce amid broad-based weakness in precious metals, but subsequently climbed to $1,689.68 – its best level since January 2nd. The SPDR Gold Trust (GLD), the world’s largest gold price proxy and gold ETF, advanced by $0.78, or 0.5%, to $163.43 per share.

Silver bounced back in concert with the price of gold, as it jumped from an intra-day low of $31.05 per ounce to as high as $31.77 in late morning trading. Gold and silver stocks, however, lagged the metals and the broader equity markets. The Philadelphia Gold & Silver Index (XAU) remained down by 0.3% at 162.03 while the S&P 500 Index rose by 0.3% to 1,477.47.

Among widely-traded stocks in the XAU, notable decliners included Agnico-Eagle Mines (AEM), Kinross Gold (KGC), and Randgold Resources (GOLD). Shares of AEM slid by 0.4% to $50.70, KGC by 0.8% to $9.54, and GOLD by 0.5% to $93.05.

Gold prices initially fell after the latest U.S. weekly jobless claims data came in at 335,000 – well below the 369,000 consensus estimate among economists. The better than expected report fueled selling in safe havens such as the yellow metal, but the price of gold later spiked higher after a weak report on U.S. manufacturing activity. The Philadelphia Fed Index fell to negative 5.8 – below the zero level that separates expansion from contraction, and short of the positive 5.6 level economists were expecting.

Although the gold price is likely to continue to be impacted by U.S. economic data, a more significant catalyst for the yellow metal is the looming debt ceiling. Commenting on this matter, Credit Suisse analyst Tom Kendall wrote in a recent note to clients that “The broader debate that is going to happen in the U.S. in the run-up to the debt ceiling crisis point at the end of February is going to be supportive of gold. Talks of downgrades from the major rating agencies will be part of it.”

Kendall went on to say that “This focuses people’s attention on the longer-term stability of the U.S. debt situation and gets the market thinking about the longer-term value of the U.S. dollar and benefits gold.”