Gold price continued its record-setting run

The gold price continued its record-setting run Thursday, climbing to $1,678.50 per ounce before back to 1658 this Friday (Eastern Time). The price of gold soared despite broad-based strength in the U.S. dollar, which gained 4% versus the yen after intervention in the currency markets by the Bank of Japan. Concerns over the prospect of a double-dip recession in the U.S. have boosted the allure of gold and weighed heavily on global stock markets in recent weeks.

The gold price advanced to a new record high yesterday for the fifth day in eight trading sessions. The spot price 0f gold reached an intra-day high of $1,672.80 per ounce, boosted by ongoing economic worries in the United States and Europe. COMEX gold futures, per the December contract, hit a new all-time high of $1,675.90 per ounce.

Marc Faber, a long-time gold bull and editor of The Gloom, Boom and Doom Report, commented that ” I just calculated that if we take an average gold price of say around $350 in the 1980s and compare that to the average monetary base and the average U.S. government debt in the 1980s…and then if I compare this to the price of gold to today’s government debts and monetary base, gold hasn’t gone up at all. It’s actually gone against these monetary aggregates, and against debt it’s actually gone down. So I could make the case that gold is today probably very inexpensive.”

Over the past week, a key catalyst for the gold price rally has been the deterioration in U.S. economic data. In light of the recent stretch of worse than expected reports, on Wednesday J.P. Morgan lowered its growth outlook for the U.S. economy. The firm cut its GDP estimates to 1.5% from 2.5% in the third quarter of 2011; to 2.5% from 3.0% in the fourth quarter; and to 2.0% from 2.5% in the first half of 2012. In addition, J.P. Morgan is now forecasting that the Federal Reserve will not begin to raise interest rates until the middle of 2013, versus its previous estimate of the start of 2013.

Needless to say, a more dovish Federal Reserve and a longer period of negative real interest rates make the case for a higher gold price that much stronger.