UBS lifted its 2012 average gold estimate to $2,075

The gold price climbed $39.66 to $1,857.32 per ounce Thursday afternoon, rebounding from yesterday’s sharp sell-off. The SPDR Gold Trust (GLD), a proxy for the gold price and the world’s largest gold ETF, advanced $3.77, or 2.1%, to $180.85 per share. COMEX gold futures, per the December 2011 contract, reached an intra-day high of $1,868.70 per ounce and maintained the majority of their gains as trading progressed.

Despite the volatility and series of large declines, the gold price recently surpassed the price of platinum for the first time since 2008. On Thursday, platinum advanced $25.30 to $1,854.00 per ounce, however, gold’s outperformance continued, sending the platinum/gold ratio below 1.0 once again. Gold’s superior performance relative to platinum has been largely related to ongoing risks of renewed recessions in the U.S. and Europe.

UBS was the latest investment bank to raise its gold forecast, based on a multitude of factors likely to push the yellow metal to further new all-time highs.

UBS lifted its 2012 average gold estimate to $2,075, a 50.4% increase over its prior target of $1,380 per ounce. In 2013, UBS expects gold to average $1,780 per ounce, 48.3% above its prior estimate of $1,200 per ounce.

In its report to clients, analysts led by Edel Tully wrote that “Our core view is that ongoing global macroeconomic disappointments, the inevitability of further negative turns in the European sovereign debt crisis, and low business, consumer and investor confidence will lead to gold being increasingly used as the line of defence against negative market outcomes. With the pool of competing asset alternatives sparse, ‘new’ money will flow into the gold market over the months ahead and into 2012, which has significant price implications.”

UBS went on to say that “The maintenance of U.S. rates close to zero means that gold is not in competition with assets that offer yield. Economic growth expectations globally are declining, high debt burdens in Europe will continue to hamper growth, and the risk of a U.S. recession is rising. All of these factors are individually positive for gold. Taken together, they are a potentially explosive cocktail.”

Gold remained firmly in negative territory Thursday morning following the release of the latest Fed Beige Book

Gold remained firmly in negative territory Thursday morning following the release of the latest Fed Beige Book. The gold price slid 2.5% Thursday morning, declining $60.20 to $1,815 per ounce. After trading to a new all-time high early yesterday, the price of gold has plunged $92 over the past 30 hours.

The Beige Book, comprised of economic data collected by each Federal Reserve Bank in their respective districts – noted that “economic activity continued to expand at a modest pace, though some Districts noted mixed or weakening activity.”

Highlights included:

- Consumer spending increased slightly in most Districts since the last survey, but non-auto retail sales were flat or down in several Districts

- Although poor weather dampened growth in some areas, tourist activity remained solid in most Districts

- The demand for services was generally positive throughout the nation, but one region said conditions were deteriorating

- Of the five Districts reporting on transportation, three said conditions were mostly positive, while the other two reported activity as flat or slightly below expectations

- Manufacturing conditions were mixed across the country, but the pace of activity slowed in many Districts

- Residential real estate markets remained weak overall with only a few slight improvements in some Districts

- Most Districts characterized commercial real estate and construction activity as weak or little changed, but improvements were noted in several areas

- Loan demand remained stable or slightly weaker, and lending standards were largely unchanged with an improvement in loan quality

Euro zone bailouts is waning

Financial markets viewed the loss as a strong indication that support for euro zone bailouts is waning. Coupled with last Friday’s losses, the Stoxx Europe 600 Index posted its largest two-day decline since March 2009. The euro currency tumbled to 1.4060 against the U.S. dollar, its lowest level in over a month.

The rally in the gold price follows a 3.1% rise last Friday, when the yellow metal surged following the worse than expected U.S. non-farm payrolls report. As economic data deteriorates across the globe, investors are increasingly moving a greater percentage of their assets into gold as a safe haven and store of value.

Gold price traded to yet another record high at $1,921 per ounce overnight before moving back below $1,900 Wednesday morning. The price of gold surged following heavy liquidation in European stock markets on the back of a key election loss by German Chancellor Angela Merkel’s political party. S&P 500 stock futures plunged 27.30 to 1,142 while the cyclically-sensitive copper price, lower by 1.8% to $4.05 per pound, headed for its largest loss in over a month. The gold price rallied and equity markets in Asia and Europe posted steep losses amid escalating euro zone sovereign debt concerns. The rising fears stemmed from the news that German Chancellor Angela Merkel’s political party suffered its fifth election loss this year and its worst showing since 1990.

Gold Price Back To $1,900 per oz on Tuesday Morning

Gold Price Back To $1,900 per oz on Tuesday Morning

Weakest jobs data since September 2010!

The tepid labor market has led to a flurry of chatter from economists and investment strategists that a fresh round of fiscal and monetary stimulus is in the offing. President Obama is set to give a speech next week where he will outline a plan to restart the waning economic recovery. Later this month, Chairman Bernanke and the Federal Open Market Committee (FOMC) will convene a two-day meeting. A fresh round of quantitative easing appears to be on the table despite the Fed Chairman’s dwindling consensus on the FOMC. Gold prices have soared 9.7% off the $1,704 per ounce level hit just two weeks ago.

The gold price surged closing this week ahead of the release of the monthly jobs report and rallied further on the weaker than expected data. The price of gold climbed $56.12 to $1,882.30 per ounce after the Labor Department reported that zero nonfarm payrolls were created in August versus expectations of 68,000, according to a Bloomberg survey of economists. This was the weakest jobs data since September 2010. Furthermore, July’s payroll figures were revised downward. The unemployment rate was unchanged at 9.1% in August.

Goldman Sachs lowered its estimate for tomorrow’s key job report

Goldman Sachs lowered its estimate for tomorrow’s key job report following this morning’s ISM data. In a note to clients, chief U.S. economist Jan Hatzius reduced the firm’s August non-farm payroll estimate to 25,000 from 50,000.

The Goldman economist explained that “The main reason is the accumulation of evidence of weak hiring in late July and August: a sharp deterioration in perceptions of job availability in the latest Conference Board survey, a drop in today’s ISM manufacturing employment index, another drop in job advertising, and a soft ADP report. Layoffs seem to have remained low, given steady jobless claims in the 410,000 range, although even here the recent pickup in layoff announcements is a concern.”

Heading into today, the consensus estimate among economists for the jobs report was 75,000 non-farm payrolls added. If the data comes in below consensus – as Goldman now believes – the price of gold is likely to benefit.

The gold price oscillated near $1,830 per ounce Friday morning, trading near unchanged on the day. After sliding off its $1,913 all-time high posted on Aug 22, the price of gold has been held in check under $1,850 as investors and traders weigh whether a deeper correction is in the offing.

FOMC minutes contained no surprises, and consequently our view on QE3 remains unchanged

After a relatively lacklustre day, gold received a shot in the arm yesterday after the release of the much-anticipated FOMC minutes. Investor hopes of further monetary accommodation were raised by discussions among members concerning policy options available to boost the economy, should it become necessary. The various tools outlined were, a) further quantitative easing, b) maturity extension of the existing bond portfolio and c) lowering of the interest rate on reserves. Further contributing to speculation that September’s meeting could see an announcement of more monetary accommodation, was the decision to extend the meeting to two days.

For us, the FOMC minutes contained no surprises, and consequently our view on QE3 remains unchanged. While the likelihood has increased in recent weeks, we await further evidence on the extent of the weakness in the US economy before making QE3 our base case. To this end, should tomorrow’s ISM manufacturing and Friday’s non-farm payrolls continue to decline, this would most definitely increase the probability of further quantitative easing.

After the initial FOMC induced surge, precious metals have once gain began to track sideways. Asian flows were muted amid Eid al-Fitr celebrations and various other regional holidays in India. This lack of direction has extended into this morning, with participants likely waiting on the sidelines ahead of Friday's non-farm payrolls.

Gold support is at $1,793 and $1,760.