Gold price stabilized this morning at $1,620

The gold price stabilized this morning at $1,620 after dropping $41.00, or 2.5%, to $1,609.15 per ounce on Wednesday as precious metals’ weakness resumed and the U.S. dollar rallied. The spot price of gold held steady near $1,650 for most of the morning, but plunged to an intra-day low of $1,597.80 as renewed liquidation engulfed the yellow metal. With the decline, the gold price extended its loss in September to 11.9%. In doing so, the price of gold is now on pace for its worst month since it plummeted 17.4% in October 2008.

Philadelphia Fed President Charles Plosser was the lastest central banker to criticize the accommodative monetary policies implemented by Chairman Ben Bernanke. In a speech on the economic outlook to the Business Leaders Forum at the Villanova School of Business, Plosser expressed his skepticism that Operation Twist would encourage businesses investment or consumer spending in light of the uncertain economic and fiscal environment in the U.S.

Gold price drop below $1,600 per ounce again

The gold price drop below $1,600 per ounce on Thursday morning sell-off was fueled by strength in the U.S. Dollar Index (DXY), which advanced 0.5% to 78.42.

Rally in Gold price were fueled by weakness in the U.S. dollar

The rally in Gold price were fueled by weakness in the U.S. dollar, as the U.S. Dollar Index (DXY) fell 0.6% to 77.609. Although the gold price initially plunged amid further liquidation in precious metals, it rebounded yesterday afternoon alongside other dollar-denominated asset classes. The broad-based rally in commodities and stocks was fueled by reports that euro zone officials were considering implementing additional measures to combat the sovereign debt crisis. Although no specific plans were announced, European Central Bank (ECB) executive board member Lorenzo Bini Smaghi stated at a conference on Monday that assets from the €440 billion European Financial Stability Fund (EFSF) could be used as collateral to borrow from the ECB. Such borrowings could then be used for additional bailout funds and/or to help recapitalize troubled European banks.

Gold price moved sharply higher Wednesday morning, gaining $31.00 to $1,658 per ounce. After sliding 6.5% over the past two trading sessions, the price of gold moved higher on bargain hunting among investors and traders. Silver spiked higher by a huge $1.82, or 5.9%, to $32.56 per ounce. On a closing basis, gold’s sister precious metal declined 24.4% over the last six trading days. Optimism that European leaders are beginning get serious about stemming the waning confidence in the continent’s banking system helped buoy global stock and commodity markets.

Gold price continued to fall Tuesday morning, plunging $34.25 to $1,625 per ounce

Gold price continued to fall Tuesday morning, plunging $34.25 to $1,625 per ounce. Another hike in margins by the CME Group helped greased the skids of the current correction in the gold price. Today’s decline comes on the back of the price of gold posting its worst week since 1983 as broad-based liquidation engulfed the precious metals space. The spot price of gold tumbled $96.48 to $1,644.27 on Friday, bringing its weekly loss to 9.2%. COMEX gold futures slid $101.90, or 5.9%, to $1,639.80 per ounce on Friday, marking the third largest single-day nominal decline ever. With today’s drop, the gold price is now 15.6% below its $1,922.20 all-time high, reached less than three weeks ago on September 6.

McAlvany’s longer-term bearish stance on the U.S. dollar contrasted with his bullish stance on the commodities complex. He predicted that central banks across the globe will continue to engage in policies that debase their currencies in efforts to stimulate economic growth. As a result, he stated that “I think commodities do have a good long-term play,” but also acknowledged that “certainly as long as there is these liquidity concerns in the market you’ll see a liquidation of most of your industrials and ags.”

Going forward, he asserted that “The real differentiation will be with the precious metals, gold in particular, even more than the white metals, as something that has no counterparty risk.” When subsequently asked what his gold price outlook is, McAlvany responded that “I think this year still would not surprise me to see the year finish above $2,000 an ounce. And beyond that $2,500, $3,000, on its way to 4 or 5 (thousand).” McAlvany did not put a time frame on his $5,000 gold price call, however.

“I think the issue is not so much the price of gold but the value of the currencies that it’s priced in,” McAlvany added. “And as they continue to compete on the downside, you’ll see the price of gold appreciating. In fact that’s why I think on a longer-term basis you have a strong argument for commodities in general beyond the supply and demand constraints that you’ll face on a week-in week-out basis. I think you’ll see them all repriced as we have sort of a beggar thy neighbor policy in place in the currency realm.

Based on his bullish gold price outlook, McAlvany was asked if precious metal mining companies would be “of interest to you.” Although he did not discuss specific gold and silver stocks, McAlvany responded that “It would be, it would indeed.”

The spot gold price fell to its lowest level since mid-August

The price of gold came under significant pressure yesterday as the U.S. dollar rallied to a seven-month high against a basket of foreign currencies. The spot gold price fell to its lowest level since mid-August. The SPDR Gold Trust (GLD), the world’s most liquid gold price proxy, tumbled to $164.60 Friday morning – leaving the world’s second largest ETF lower by 6.4% this week.

Legendary investor Jim Rogers echoed this positive sentiment on the dollar in a CNBC interview on Thursday. “I own the dollar. As we talked last time, I think the dollar is going to go higher…It’s going up against everything right now. There are various reasons for that, one of which is everybody is panicked and for some reason they are rushing into the U.S. dollar. The U.S. dollar is not a safe haven if you ask me but I do own it.”

Rogers – known for running the Quantum Fund with George Soros and for his positive stance on commodities over the past decade – reiterated that his bullish bet on the greenback is only for the short-term. Over the longer-term he sees it going considerably lower as the U.S. government remains committed to debasing its currency to stimulate economic growth. Rogers has also been a long-time gold bull and recently predicted that the gold price will soon surpass its $2,300 inflation-adjusted all-time high.

Although Rogers did not specifically discuss the price of gold in yesterday’s interview, his outlook for the global financial system and economy augurs well for higher gold prices over the longer-term. “The major problems are coming from the West, from Europe and the U.S. We’re much worse off than we were in 2008 because the debt has gone through the roof since 2008. At least in 2008 there was a possibility that governments could bail us out. Right now of course the governments have gotten deep into debt themselves.”

Gold price may face additional headwinds in the short-term, the longer-term outlook for the price of gold remains more favorable

In the aftermath of the Fed meeting, although the gold price may face additional headwinds in the short-term, the longer-term outlook for the price of gold remains more favorable. Chairman Bernanke has made it particularly clear that his foremost goal is to prevent deflation from overwhelming the U.S. economy and that he is willing to go to extraordinary measures to fight that battle. The inclusion of the “significant,” wording – coupled with the commitment to “employ its tools as appropriate,” and leave the Fed funds rate near zero through mid-2013 – suggest that the Fed is likely to maintain policies that indirectly benefit the gold price for the foreseeable future.

The gold price tumbled $45.91, or 2.6%, to $1,736.44 Friday morning amid significant weakness in financial markets across the globe. Silver plunged alongside the price of gold, by $2.61, or 6.6%, to $37.01 per ounce. U.S. markets were set to open with large losses, as S&P 500 futures dropped 30.00 points to 1,125.75. In addition to disappointment stemming from yesterday’s Fed meeting, a weaker than expected report on the Chinese economy helped fuel the selling. HSBC’s preliminary China Manufacturing Purchasing Managers’ Index, or “flash” PMI, slid to a two-month low of 49.2 in September, below the 50 level separating expansion from contraction.

The markets and Gold price do not appear to be very pleased with Operation Twist

The markets and Gold price do not appear to be very pleased with Operation Twist, at least not at first glance. Following the Fed meeting, U.S. equity markets turned sharply lower, with the Dow Jones Industrial Average (DJIA) closing lower by 283.82 points, or 2.5%, at 11,124.84.

However, gold also turned lower and the U.S. dollar rallied after the Federal Reserve announced plans to extend the average maturity of its holdings of U.S. Treasuries, also known as Operation Twist. The U.S. Dollar Index, a trade-weighted measure of the greenback versus several of the world’s other leading currencies, climbed from negative territory on the day near 76.80 to as high as 77.33. The euro gave up its modest gains against the dollar as it slid 0.2% to 1.3673 this afternoon.

Joseph Arsenio, Managing Director at Arsenio Capital Management, commented to Reuters that “The market is deteriorating because the Fed didn’t reduce yields on reserves. There is no additional impetus for banks to lend. It wasn’t sufficiently stimulating. The stock market is reacting to that and since that has been fairly closely coordinated with oil markets, we’re seeing declines there as well.”