Gold Prices Stabilize Ahead of Strong Demand Season

By Roger Baettig | January 09 2013 1:02 PM

Retuers

China to overtake India as world's biggest gold consumer for the first time on an annual basis.

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GOLD PRICE NEWS – The gold price oscillated between gains and losses on Wednesday as precious metals remained in consolidation mode. The spot price of gold climbed to an overnight high of $1,665.97 per ounce, but fell to $1,654.32 in morning trading as the U.S. dollar turned higher against a basket of foreign currencies. The SPDR Gold Trust (GLD), a proxy for the gold price and the sector’s largest ETF, dipped by $0.17 to $160.39 per share.

Silver mirrored the price of gold today, rising to $30.56 in overnight trading but later sliding by $0.33, or 1.1%, to as low as $30.07 per ounce. Gold and silver stocks retreated in concert with the precious metals as well. The Market Vectors Gold Miners ETF (GDX) dropped by $0.35, or 0.8%, to $44.30 per share. The sector also lagged the broader equity markets, as the S&P 500 Index advanced 0.4% to 1,462.20.

Notable GDX components moving lower this morning included Agnico-Eagle Mines (AEM), Goldcorp (GG), and Harmony Gold (HMY). Shares of AEM fell by 1.0% to $49.37, GG by 0.9% to $35.84, and HMY by 1.3% to $7.76.

Looking ahead for the gold price, Natixis analyst Nic Brown wrote in a note to clients that “We find ourselves just ahead of Chinese New Year, which seasonally is one of the strongest times of the year for gold demand, and seven weeks away from the new deadline in the U.S. political system, and we’re surprised at how low gold prices are.”

“If there was a reason for buying gold, you’ve got two good ones there,” Brown added. “If the debt ceiling is used as a political bargaining tool, that would be a potentially ugly time for the U.S. credit rating.”

From a technical perspective, ScotiaMocatta contended that the price of gold “continues to consolidate last week’s down move from $1,694 to $1,627.”

The firm went on to say that “Our bias remains lower, with $1,627 our next line in the sand. Only a close back above previous range high of $1,671 would shift our short term view to neutral.”