Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold dropped 1% to close at a one-month low below $1,220 as the dollar extended its rally on uncertainty about Greece and speculation that the Fed may raise interest rates in June.

Greece began serious talks with EU finance ministers over dismissing the onerous austerity requirements of the bailout agreements that began in 2010, when it faced insolvency. The new government led by Prime Minsiter Alexis Tsiparas contends that it cannot repay the debts because of constraints on economic growth resulting from the imposed fiscal austerity.

Germany has remained steadfast that Greece must meet all of its obligations. In the meantime deposits are draining from Greek banks, bond yields are rising, and equities are plummeting. A further run on Greece's banks could collapse the system. Analysts polled by Reuters put the chances of Greece exiting the euro at one in four.

The dollar rose against a basket of rivals, including the euro and the yen, as traders sought safety in cash. The buck was also supported by momentum trading after several prominent Fed members suggested yesterday that they are increasingly open to raising interest rates in June or soon thereafter. A rising dollar weighs on gold and other commodities by making them more expensive overseas.

However, Goldman Sachs COO Gary Cohn said today that the Fed will be unable to raise rates because other major central banks are still lowering theirs. De facto currency wars are undermining U.S. corporations already, Cohn asserted, and will shave 7% off earnings this year. The dollar must not climb if exports are to compete.

The other precious metals were mixed, with silver and platinum sliding 0.7% and 1%, respectively, while outlier palladium edged up 0.1%

At the Comex c lose: April gold dropped $12.60 to $1,219.60; March silver slid 11 cents to $16.76; April platinum lost $11.70 to $1,195.60; and March palladium edged up 85 cents to $766.55 an ounce.