Gold Price Hovers at $1,525, Silver Gains 1.5%
Wednesday, May 25, 2011, 9:36am EST
GOLD PRICE NEWS – The gold price, at $1,425.50 per ounce, traded near unchanged Wednesday morning amid quiet currency and equity markets. The price of gold held steady following weaker than expected durable goods data, which fell 3.6% in April – steeper than the 2.5% drop expected by a Bloomberg survey of economists. The figure was the weakest in six months as demand for aircraft fell and supply disruptions from the earthquake in Japan negatively impacted the data. Silver prices rallied 1.5% to $37.20 per ounce.
The recent stretch of gains in the gold price continued on Tuesday, as the price of gold rose $8.23 to $1,525.35 per ounce. The price of gold was boosted by lingering sovereign debt concerns in Europe, coupled with cautious commentary from Federal Reserve Governor Elizabeth Duke. With its advance, the gold price climbed to within 3.4% of its all-time record high and extended its year-to-date gain to 7.2%.
Silver rallied alongside the gold price, surging $1.60, or 4.6%, to $36.69 per ounce. Strength in precious metals was fueled by widespread gains in commodities and weakness in the U.S. dollar. The iShares Silver Trust (SLV), the world’s largest silver ETF, jumped $1.50 to $35.77 per share. Despite being 24.6% below its 31-year high of $49.82 reached last month, silver remains higher by 18.6% thus far in 2011.
The rally in gold and silver prices helped lift precious metals equities, evidenced by the 2.6% jump in the Philadelphia Gold & Silver Index (XAU) – its best single-day performance since a 4.5% spike on April 4. Notable gold shares moving higher included Yamana Gold (AUY) and Kinross Gold (KGC), which advanced 3.2% and 2.6%, respectively. Among silver equities, Coeur d’Alene Mines (CDE) and Hecla Mining (HL) rallied 4.9% and 2.5%, respectively. The share prices of gold and silver producers hovered near unchanged Wednesday morning alongside the gold price.
At an event sponsored by the Federal Reserve Bank of Boston on Tuesday, Fed Governor Elizabeth Duke painted a grim economic picture of the environment facing most lower and middle-income U.S. citizens. “The financial crisis and the slow recovery from it has obviously had a dramatic impact on the financial decisions made by American families,” according to Duke. “Many now have fewer financial resources and limited options.”
The latest remarks from Ms. Duke, a voting member of the Federal Open Market Committee (FOMC), stood in stark contrast to positive comments she made just two weeks ago. At a conference in St. Louis, Duke contended that “Recent anecdotal evidence leads me to believe that conditions are improving for small businesses…the combination of a variety of recent survey results paints a picture of increasing optimism about future sales and business conditions and a corresponding easing of credit availability for small businesses.”
Duke’s cautious comments were the latest from a voting member of the FOMC, reinforcing the dovish view held by the majority of FOMC members. With the conclusion on June 30 of the Fed’s second round of quantitative easing (QE2) any and all comments from FOMC members have the potential to move markets.
Commenting on the outlook for gold prices as QE2′s conclusion approaches, Macquarie Commodities Research team wrote in a recent report that “We do not think the end in QE2 will mark a step change in the way gold is trading, although we will be watching closely how the market will react to any further shifts in policy direction from the Fed.”
Looking ahead to the remainder of the week, a key catalyst for the price of gold could be Thursday’s release of the second estimate of first quarter GDP. Fed Governor Duke, Chairman Ben Bernanke and their central bank colleagues will be keeping a close eye on this key economic report. A disappointing figure would strengthen the case for further monetary stimulus and likely be supportive of gold prices, while a better than expected report may provide a headwind for the yellow metal.
http://www.goldalert.com/gold-price-hovers-at-1525-silver-gains-1-5/
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