Gold Price Steady, BofA Sees $2,000 Ahead

Gold prices are steady right now, but Bank of America is expected at least $2,000 gold ahead. Bank of America believes that gold's prices will rise due to slowing economic activity and most likely another round of quantitative easing in the second half of 2012.

Tuesday, April 3, 2012, 10:01am EDT
Written by GoldAlert Staff
Gold Alert

GOLD PRICE NEWS – The gold price stabilized near $1,677 per ounce Tuesday amid a relatively quiet morning on Wall Street. The price of gold held in a tight range between $1,673 and $1,682 in overnight trading, while the U.S. Dollar Index inched higher by 0.1% to 78.93. While the gold price traded near the flatline, silver retreated $0.18, or 0.5%, to $32.85 per ounce. U.S. equity markets moved slightly lower as well, with the S&P 500 Index falling 0.3% to 1,415.38.

On Monday the gold price began the second quarter of 2012 on a positive note, as it advanced $8.41, or 0.5%, to $1,677.40 per ounce. The move higher in the price of gold coincided with U.S. dollar weakness and a broad-based rally in commodities. The gold price climbed from an intra-day low of $1,662.10 to $1,684.90 before paring its gain in afternoon trading. The world’s largest gold price proxy, the SPDR Gold Trust (GLD), closed up by $0.82 at $162.94 per share.

Silver followed a similar trajectory to that of the gold price yesterday, rising from as low as $32.28 to finish higher by $0.67, or 2.1%, at $33.02 per ounce. Coming off of quarters in which the price of gold and silver advanced by 6.7% and 16.7%, the metals are now higher on a year-to-date basis by 7.3% and 19.1%, respectively.

Gold shares climbed amid the combination of the gold price rally and strength in the broader equity markets. The Market Vectors Gold Miners ETF (GDX) jumped $0.86, or 1.7%, to $50.39 per share while the S&P 500 Index settled higher by 10.43 points, or 0.7%, at 1,418.90. Among the large-cap gold producers, two of yesterday’s top performers were Goldcorp (GG) and Yamana Gold (AUY). GG advanced by $1.06, or 2.4%, to $46.12 per share while AUY rose $0.32, or 2.1%, to $15.94 per share.

Despite Monday’s move higher, the price of gold remains near the midpoint of the area it has occupied for the better part of this year. Jeff Wright, a managing director and senior research analyst at Global Hunter Securities, wrote in a note to clients that he sees the yellow metal continuing to consolidate in the near-term.

“I still believe we are range bound on gold for the near term between $1,600 – $1,800 per ounce;” Wright stated, “and do not see this changing without further quantitative easing by the U.S. Federal Reserve, significant progress towards resolving European debt crisis or a collapse of the euro.”

In contrast to Global Hunter Securities, one firm that remained bullish on the gold price was Bank of America Merrill Lynch (BofA). Yesterday, BofA metals strategist Michael Widmer reiterated his forecast for the price of gold to reach $2,000 per ounce in the next 12 months.

In his report, the firm contended that “We believe the trajectory of U.S. gross domestic product growth (and linked to that, movements in Treasury yields) will be critical for gold prices. Our base case is that economic activity in the U.S. will slow from current levels, with the Fed likely announcing another round of quantitative easing in [the second half 2012], which would be bullish for gold.”

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