Gold Price Spikes on Latest Greek Rescue

GOLD PRICE NEWS – The gold price spiked Tuesday morning, rising $11.50 to $1,746 per ounce.  News late yesterday that Greece has secured a €130 billion rescue package failed to quell speculation that Greece would eventually be forced out or leave the euro.  Precious metals prices rose on the news.  S&P 500 stock futures relinquished most of their post-announcement gains, but managed to climb 2.30 to 1362.

Gold prices remain mired in the $1,700-$1,750 trading range, awaiting a catalyst to move the yellow metal strongly in one direction or the other.  The spot price of gold finished last week just barely in positive territory, advancing a mere 0.1%.  However, the gold price did snap a two-week losing skid and enters the week with a 10.2% gain in 2012.

Silver followed gold higher this morning, rising nearly 1% to $33.88 per ounce.  Gold’s sister precious metal closed off 0.9% last week, posting its third consecutive weekly decline.  However, notwithstanding its recent weakness, silver’s 19.8% year-to-date ascent makes it one of the top performing asset classes thus far in 2012.

In spite of the stability in the price of gold, shares of most gold producers finished the week in negative territory.  The Market Vectors Gold Miners ETF (GDX) retreated 0.6% to $54.15 per share, marking its third straight week of losses.  The GDX remains higher by 5.3% in 2012, but has cut its gain by approximately half since closing at $57.46 on February 2.  Gold mining stocks moved higher across the board Tuesday morning.

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Many of the world’s largest gold mining companies were in the news last week after releasing their latest quarterly financial results.  Barrick Gold (ABX), the sector’s largest producer, reported in-line earnings and production guidance, according to Dahlman Rose analyst Adam Graf.  However, the market reacted negatively to the report, as ABX posted a weekly loss of 2.4% on its way to $47.03 per share.

Other notable gold miners reporting earnings were Agnico-Eagle Mines (AEM), Goldcorp (GG), and Kinross Gold (KGC).  Each gold stock finished the week in positive territory – AEM by 2.1% at $35.44, GG by 2.7% at $47.04, and KGC by 1.6% at $10.95 per share.

Last week, a plethora of U.S. economic data combined with ongoing uncertainty over the Greek bailout to send the gold price oscillating between gains and losses.  Looking ahead to the coming week, a similar slate of items likely to impact the price of gold await.  Euro zone officials will hold additional meetings to discuss the specifics of Greece’s aid package.  Also, the U.S. economic calendar contains several noteworthy reports.

Mark Luschini, chief investment strategist at Janney Montgomery Scott, wrote in a recent note to clients that “Everyone is playing this gigantic game of brinksmanship but I suspect they [Greece and the euro zone] are working toward avoiding default and there will be an agreement. Greece knows what it will have to do and Europe will provide funds.”

Lushini was proved correct and the euro currency is rallying against the U.S. dollar this morning.  The gold price, given its relatively high correlation of late with the euro, is also catching a bid off the news out of Europe.  The currency debasement that will inevitably stem from yet another bailout bodes well for gold’s longer-term prospects.

In the U.S., Existing Home Sales for January will be released on Wednesday, followed by weekly jobless claims on Thursday.  Last week, jobless claims fell to 348,000 – their lowest level since March 2008.  However, a considerable portion of the decline has been due to a drop in the labor participation rate, suggesting that many individuals are dropping out of their labor force.  The week then concludes on Friday with the University of Michigan Consumer Sentiment Index and New Home Sales for January.