Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold added 0.1% to close just under $1,221 after soft U.S. economic data undermined the dollar and boosted demand for alternative stores of value.

Retail sales dropped for the second straight month in January, falling 0.8% after a 0.9% decline in December, as consumers resisted the urge to spend savings from lower gas prices. With consumer spending accounting for nearly 70% of GDP, the slowdown is expected to reduce U.S. growth in the first quarter. Jobless claims rose by 25,000 last week to 304,000, more than forecast, suggesting a loss of momentum in the labor market. And home foreclosure jumped 5% in January, according to RealtyTrac, driven by an increase in bank repossessions.

The dollar fell by as much as 1% on the disappointing data as traders began to question whether the Fed will raise interest rates in June. The buck was further pressured by reports that the ECB agreed to extend Greece an additional $6.5 billion in emergency liquidity, rallying the euro against the dollar as negotiations drag on about reworking Greek debt. A weaker dollar boosts demand for gold by making it less expensive to buyers outside the U.S.

Gold received additional support from Sweden's surprise decision to cut its key interest rates into negative territory and embark on Fed-style quantitative easing, a program of bond-buying intended to increase liquidity. QE supports higher gold prices by undermining paper currencies and boosting the risk of long-term inflation. In addition, France and Germany brokered a ceasefire in the Ukraine, which helped to rally oil prices by 5% and lifted commodity-demand for precious metals.

The World Gold Council published its Gold Demand Trends for 2014 today. Investment demand for gold rose 2% worldwide in 2014 and net purchases by central banks rose 17% to 477 tonnes, the second-highest total in 50 years. Like individual investors, central banks buy gold to offset currency risk and hedge against long-term inflation. Global demand for gold jewelry, however, fell 10%.

The other precious metals tracked higher with gold. Silver added 0.2% while platinum and palladium picked up 0.4% and 0.9%, respectively.

At the Comex close: April gold inched up $1.10 to $1,220.70; March silver added 3 cents, to $16.79; April platinum picked up $4.90, to $1,200.50; and March palladium gained $7.10 to $773.65 an ounce.