Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.6%, closing near $1,235 and wiping away most of yesterday's losses, as the dollar weakened again on expectations of fewer and slower rate increases from the Federal Reserve. Gold finished the first quarter up 16.4% for its best quarterly performance since 1986.

Citing greater economic risks from slowing global growth and moribund inflation, Fed Chair Janet Yellen advocated earlier this week for caution in tightening monetary policy, lowering expectations for the likely number of rate hikes this year. Chicago Fed President Charles Evans echoed her position yesterday.

The dollar fell back against major rivals, with the Dollar Index slipping 0.3%, on follow-through from Yellen's dovish statements. Pressured by lower rate expectations, the buck is on pace for its worst quarter since 2010, with the Dollar Index down 4.2% so far this year. A weaker dollar supports gold and other commodities denominated in it for international trade.

Gold's impressive rise this quarter was driven by a number of factors in addition to the falling dollar, including China's severe economic slowdown, volatility in equity markets, negative interest rates in Japan and Europe, and the ongoing turmoil in the Middle East.

In a new report published today, the World Gold Council concluded that the negative interest rates implemented by Europe and Japan will increase long-term demand for gold among investors and central banks. Negative rates erode confidence in paper currencies and increase market volatility as central banks run out of tools to spur growth overcome deflation, according to the report. Gold's returns have doubled their long-term average in periods of very low interest rates.

The other precious metals were mixed for the day but higher for the quarter. Silver jumped 1.7% today and 12% this quarter. Platinum gained 1.2% today for a quarterly rise of 9%. Palladium slipped 0.4% today but gained 0.4% in Q1.

At the Comex close: June gold gained $7 to settle at $1,235.60; May silver jumped 25 cents to $15.46; July platinum climbed $11.30 to $977.50; and June palladium slipped $2.35 to $564 an ounce.