Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold jumped 1.6% to close at a one-week high above $1,254 as rising oil and a weaker dollar boosted demand for alternative assets. Silver surged 4.4% to just under $17, its highest price in almost a year.

The dollar weakened another 0.6% against major rivals and dropped to 10-month lows against commodity-dependent currencies like the Aussie dollar as speculation increases that the Fed will be unable to raise interest rates because of slowing growth in the U.S. A falling dollar boosts gold and other commodities denominated in it for international trade by making them less expensive to overseas buyers.

The buck was further pressured by another round of soft U.S. economic data. Housing starts fell by more than forecast in March and new-construction permits plunged to a one-year low, suggesting the anemic growth in the rest of the economy may now be affecting the crucial housing sector.

The continuing prospect of dovish monetary policies in the world's major economies boosted risk appetite today, sending the Global Dow 1.6% higher. Adding to upbeat sentiment, oil prices have found footing closer to $40 per barrel and China's economy is stabilizing after three quarters of significant weakness.

In a potentially bullish move for gold, China launched the first yuan-denominated gold benchmark today, attempting to garner more influence over pricing in the global bullion market. With a population of 1.8 billion and a rapidly expanding middle class, much of which increasingly looks to gold as a means to protect newly-earned wealth, China is the world's top producer, importer, and consumer of the yellow metal.

Silver's 4.4% surge comes as industrial demand rises with China's returning growth. After months of underperforming gold, as evident in an unusually wide gold-to-silver ratio, the gray metal is starting to catch up Historically, the gold-silver ratio is around 15 to 1. In recent months it has been more than 70 to 1, meaning silver may be ripe for much stronger gains than gold.

The other precious metals also finished strongly higher, with platinum gaining 2.9% and palladium 2.5%.

At the Comex close: June gold jumped $19.30 to $1,254.30; May silver surged 72 cents to 16.97; July platinum climbed $37.90 to $1,015.70; and June palladium added $14.15, to $582.15 an ounce.