Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold dipped 0.1% to close at $1,179.50 as another round of improving U.S. economic data was offset by growing concerns about a possible Greek default to put a floor under safe-haven assets. The metal finished the week 1% higher.

As measured by the Producer Price Index, U.S. wholesale inflation rose 0.5% in May, the most in 30 months, behind higher costs for gasoline and food. While wholesale prices still fell 1.1% year-over-year, marking the fourth straight 12-month decline, the May uptick suggests the deflationary pressure caused by falling global oil prices earlier this year may be subsiding.

In addition, consumer sentiment is rising, according to the University of Michigan Index, with the preliminary reading for June handily beating forecasts. Combined with this week's reported 1.2% rise in May retail sales, the improving consumer optimism is expected to boost growth in the second quarter. The Atlanta Fed's GDPNow forecast model, which was surprisingly accurate in Q1, raised its Q2 prediction to 1.9% from 0.9%.

Improving data on growth and inflation should be encouraging to the Fed when it meets next week to discuss rate policy. Traders speculate that the first rate increase is likely to come in September or October, according to recent CME Fedwatch data monitoring Fed Fund futures.

Gold is being supported by new worries about Greece after the IMF walked out of negotiations yesterday, citing "major differences" with Athens over fiscal reforms. Senior EU officials have begun formal discussions on handling a Greek default for the first time. The insolvent nation must repay 1.6 billion euros to the IMF by the end of the month or risk not only default but possible expulsion from the Eurozone. Officials are increasingly skeptical that a deal can be reached in time.

The other precious metals were lowered for the day but mixed for the week. Silver slid 0.8% to end 0.0% lower this week. Platinum dropped 0.7% today but gained 0.5% this week. Palladium lost 0.7% and 1.8% on the day and week, respectively.

At the Comex close: August gold dipped 90 cents to $1,179.50; July silver fell 12 cents to $15.35; July platinum dropped $7.50 to $1,097.70; and September palladium lost $5.25 to $737.60 an ounce.