GOLD PRICE NEWS – The gold price advanced Wednesday morning, rising $7.70 at $1,509 per ounce after the Greek Parliament’s passed sweeping austerity measures. The price of gold held its gains after politicians in Greece passed a $112 billion austerity package that paves the way for the next round of bailout funds from the European Union and the International Monetary Fund.
Despite the recent rally in the gold price, the Global Precious Metals team at TD Securities remains cautious on the yellow metal over the short-term, noting that “Gold and silver have been consolidating recent losses in a fairly narrow range and it’s difficult to see a rally eventuating at this point.”
On Tuesday, gold prices moved marginally higher, hovering near $1,500 per ounce ahead of the Greek austerity vote. While the price of gold held steady, equities and cyclical commodities rallied amid hopes that Greece would pass the austerity measure and secure its next round of bailout funds. The euro moved higher Wednesday morning for the third day in a row, climbing to 1.441 against the U.S. dollar.
Silver rallied 1.1% to $34.38 per ounce after rising 1.0% yesterday. Crude oil climbed to $94.11 per barrel, while copper rose to $4.19 per pound. As for the broader equity markets, futures on the Dow Jones Industrial Average (DJIA) pointed to another strong open after yesterday’s 1.2% surge. Coupled with Monday’s 0.9% jump, the Dow posted its best two-day performance since March 18 and 21 of this year.
Precious metals equities outpaced the price of gold and silver, as the Philadelphia Gold & Silver Index (XAU) rose 1.6% to 195.32. Notable advancers included XAU components Goldcorp (GG), Randgold Resources (GOLD) and Royal Gold (RGLD). GG, GOLD, and RGLD finished higher by 1.6%, 2.1%, and 1.5%, respectively. Gold mining stocks moved higher early Wednesday morning on the back of stronger gold prices.
Over the past two weeks, gold and silver shares have outperformed the metals, a particularly encouraging sign for a sector that has experienced significant selling this year. Since June 16, when the XAU reached a 9-month low of 187.18, it has climbed 4.3%. Over the same time frame, the price of gold and silver have fallen 1.9% and 4.6%, respectively.
Despite the recent rally in asset prices, there are some who remain skeptical of the effectiveness of the proposed austerity measures. Dennis Gartman, author of The Gartman Letter and a long-time commodities investor, wrote in his latest letter that “Of course the Greek people will not stand for these austerity measures, and of course Greece will eventually default on its debt. Greece always defaults on its debt. That’s what Greece does. It has done it dozens of times in years past; it does it regularly and it will do so again here.”
As for the other European nations pressing for a bailout, Gartman wrote that “The French, the Germans, the Belgians, et al, who believe that by passing this legislation and that by extending Greece more credit they shall fix the Greek economy and shall keep the Union intact are naïve and have forgotten the lessons of history. Greece defaults. Get used to it and prepare for the eventual fact.”
Not surprisingly based on his comments, Gartman remains quite bullish on the gold price. While he acknowledged that the price of gold could continue to waver in the short term due to typical seasonality trends, he reiterated his longer-term positive gold price outlook.
Gartman’s bullish stance on the gold price is not just in terms of the U.S. dollar, but many other of the world’s leading fiat currencies. “Printing a chart of gold predicate din dollars, or EURs or Sterling of even Yen,” he wrote, “and putting those charts on wall and standing twenty feet away one can see rather plainly that the trends are still rather well defined and they are still demonstrably bullish. It will take much for them not to be so.” Read More
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