mineral exploration project – commodity prices – mining stock- trade and market

The gold price rallied $10.07 to $1,062.55 per ounce in spite of a renewed dose of pressure on Federal ReserveFederal Reserve Chairman BernankeBernanke to normalize monetary policymonetary policy. The Fed Bank of New York released a statement stating that it has been working on the operational details of reverse repos and will be ready to act in concert with the Federal Open MarketOpen Market Committee when the time comes to remove liquidity from the system. Serious discussion of tightening monetary policymonetary policy, such as that emanating from the New York Fed, could have been expected to put pressure on the gold price as well as the broader equity and commodity sectors. However, the market continues to take a “wait and see” approach that focuses more on actions than on words.

At this point, there has been little definitive action by either Chairman BernankeBernanke or President Obama to tighten either the monetary or fiscal spigots. Investors across the globe have continued to sell U.S. dollars and, as a result, the greenbackgreenback posted a new 52-week closing low, as measured by the U.S. Dollar Index (DXY). The trend of a weaker dollar and stronger asset prices remains in force. The S&P 500 closed at a new 52-week closing high at 1,097.91. There is concern from some traders and analysts that complacency, evidenced by the 18-month low made by the CBOE VolatilityVolatility Index (VIX) today, represents a headwind for further price gains in most asset classes.

The gold price is back near its all-time record close of $1,071 per ounce. While the gold price finished the day on a strong note, the same cannot be said for the gold producers. The gold mining stocks were notable laggards today with the Market Vectors Gold Mining ETF (GDX) up a mere $0.15 to $48.53 in spite of the $10.07 rise in the gold price. A declining gold stock/gold price ratio has historically preceded more serious corrections in the gold mining sector. Traders and investors will be watching carefully to see if the gold miners can regain their leverageleverage to the gold price in coming days or if their recent underperformance is a precursor to lower prices in the future.

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