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Gold Price Bounces, Set to Recapture $1,400?

Release Date: 
Thursday, December 9, 2010

GOLD PRICE NEWS – The gold price rallied $3.90 to $1,386 per ounce Thursday morning, bouncing after yesterday’s steep 1.4% drop amid widespread liquidation in precious metals.  The price of gold declined $41.62, or 2.9% in the past two days, its worst two-day decline since February 3-4 of this year.  Since reaching a new all-time record high of $1,432 earlier this week, the gold price is now on pace for its worst week since a 3% slide in mid-October.

The abrupt decline in the gold price has paled in comparison to the drop in the silver price, which fell $1.41, or 4.7%, yesterday to $28.35 per ounce.  The price of silver has now lost $2.39, or 7.8%, from its 30-year high of $30.75 reached on December 6.  In spite of this sell-off, however, the gold price and silver price remain higher year-to-date by 26.2% and 68.3%, respectively.

Gold producers and explorers rose slightly this morning, led on the upside by Barrick Gold (ABX), the world’s largest gold miner.  Gold stocks have been under heavy selling pressure over the past few days following a move to record highs early in the week.  

Commenting on this week's sell-off in the gold price and gold stocks, long-time gold bull John Hathaway described the recent weakness as a "healthy correction" in an interview on CNBC.  While he did not attempt to forecast a specific amount or duration for the gold price correction, he did note that the price of gold may be due for a longer consolidation period than it has seen in many months given the significant run from its 6-month low of $1,161 on July 27.

Despite his cautious near-term stance, Hathaway, portfolio manager of the Tocqueville Gold Fund, did reiterate his longer-term bullish outlook for the gold price.  He pointed to the quantitative easing measures being implemented by central banks in the U.S. and Europe as the primary catalyst for higher gold prices.  Hathaway dismissed the idea that gold has reached bubble status.

Echoing this positive long-term outlook were analysts at J.P. Morgan, who discussed the outlook for the gold price in their latest precious metals report.  The firm highlighted the "recent breakout of inflationary risks" as a key driver for its bullish views, noting that the Fed is "single-mindedly going ahead with QE."  The money-printing activities of the Federal Reserve will continue to have "negative implications for the dollar and consequent positive ones for precious metals as investors seek alternatives to vulnerable dollar holdings," according to the report.

With regard to a specific gold price target, J.P. Morgan analysts predicted the price of gold will average $1,425 in the first quarter of 2011, and $1,450 per ounce in the second half of next year.

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This article is independently provided by and does not represent the views or opinions of Goldline International, Inc. Although the information in this article has been obtained from sources believed to be reliable, Goldline does not guar­antee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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