Gold Price Firm, Holdings in Gold ETPs Hit Record High
GOLD PRICE NEWS – The gold price bounced back on Tuesday after yesterday’s modest sell-off as the U.S. dollar retreated against a composite of the world’s leading currencies this morning. The spot price of gold rose as much as $14.18, or 0.8%, to $1,740.28 per ounce while the U.S. Dollar Index slipped 0.5% to 80.001. The SPDR Gold Trust (GLD), the most liquid gold price proxy in the equity markets, advanced $1.24, or 0.7%, to $168.53 per share.
Silver rallied in conjunction with the price of gold, by $0.51, or 1.5%, to $33.87 per ounce. The iShares Silver Trust (SLV), the largest silver ETF, climbed $0.40, or 1.2%, to $32.69 per share. With today’s strength in precious metals, the prices of gold and silver extended their gains thus far in September to 2.8% and 6.6%, respectively.
Gold shares continued their recent outperformance of the gold price, as the Market Vectors Gold Miners ETF (GDX) jumped $0.84, or 1.7%, to $50.32 per share. In doing so, the gold stocks ETF stretched its advance this month to 5.0%. This morning, notable advancers in the sector included GDX components AngloGold Ashanti (AU), IAMGOLD (IAG), and Newmont Mining (NEM). AU rose by 1.7% to $34.38, IAG by 1.9% to $14.00, and NEM by 1.8% to $52.28 per share.
The gold sector also received a boost from weakness in the U.S. dollar, as well as a rally in the broader equity markets. The S&P 500 Index climbed by 0.4% to 1,434.95, within a fraction of the multi-year high it reached yesterday. Investor risk aversion continued to remain near the lower end of the range it has occupied for several years, with the CBOE Volatility Index (VIX) down by 2.6% at 15.85.
With the gold price surging higher in recent weeks, sentiment toward the yellow metal has risen as well. According to Reuters, holdings of gold in exchange-traded products (ETPs), increased this week to a record 72.49 million ounces. Furthermore, total holdings of gold have climbed by close to 3.5 million ounces on a year-to-date basis, of which 2.7 million ounces have moved into ETPs in just the past month.
Commenting on the rise in gold holdings, Edel Tully – a precious metals strategist at UBS – stated that “With a good portion of gold’s recent strength accounted for by the sharp increase in spec positioning, this certainly raises concerns on the longevity of the move, especially with fundamental buying virtually out of the picture…But the fact that the (ETP) camp – a relatively less-fickle group of buyers – has also been giving gold its vote of confidence offsets some of those worries.”
Looking ahead for the gold price, investors will be keeping a close eye on the German Federal Constitutional Court – which on Wednesday will provide its decision on the legality of the European Stability Mechanism (ESM) – the proposed permanent aid program designed to provide financial assistance to euro zone nations suffering from the sovereign debt crisis.
The attention will then shift on Thursday to the Federal Reserve, which will hold its next Federal Open Market Committee (FOMC) meeting. While many economists expect the Ben Bernanke-led central bank to announce further monetary stimulus – likely in the form of a third round of quantitative easing (QE3) – the strong performance of the financial markets this year, as well as the ability of the U.S. economy to thus far avoid a recession, may keep the Fed on hold for at least the time being.