2012-03-27

Gold Price Jumps after Bernanke’s Speech

The gold price advanced $16.56, or 1.0%, to $1,679.56 per ounce Monday amid weakness in the U.S. dollar and a broad-based rally on Wall Street.  The price of gold held steady near $1,660 in overnight trading, but turned sharply higher at approximately 8am ET.  The catalyst for the rise in the gold price was comments from Federal Reserve Chairman Ben Bernanke, who hinted at further monetary easing in a speech this morning.

At the National Association for Business Economics Annual Conference, Bernanke stated that “further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”

Simon Weeks, head of precious metals at Scotia Mocatta, attributed the gold price rally to “Bernanke’s comments, which people have taken to mean that further funding might be required.  I think people have taken that to mean that gold is still going to be in demand.”

As for the week ahead, the U.S. economic calendar contains several items likely to impact the price of gold.  Pending home sales for February will be announced on Monday morning, followed by the Case-Shiller Housing report for January and Consumer Confidence on Tuesday.  The February Durable Goods data will be released on Wednesday, while Thursday’s schedule includes Weekly Jobless Claims and Fourth Quarter 2011 GDP.  The week then concludes on Friday with the Chicago Purchasing Managers’ Index and University of Michigan Consumer Sentiment.

If the data continues to show a rebound in the economy, the gold price could come under pressure.  Alternatively, a disappointing stretch of economic reports are likely to provide a tailwind for the price of gold.

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