Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold surged 1.9% today, recouping most of yesterday's losses to close above $1,279, as U.S. growth in the fourth quarter came in weaker than forecast, driving safe-haven demand for precious metals. Gold finished January with an 8% gain, its biggest monthly rise in three years.

Government data showed that GDP grew at an annual rate of just 2.6% in Q4, well below consensus forecasts of 3.2% and slightly more than half of Q3's growth of 5%. Higher consumer spending was more than offset by falling exports and weaker spending by businesses and government, dragging overall growth for 2014 to 2.4%, only slightly better than 2013's growth of 2.2%.

In addition, inflation dropped to the lowest in six years, complicating the Fed's decision about when to raise interest rates. The central bank's preferred measure of inflation gained merely 0.5% in Q4 after rising an already anemic 1.2% in Q3, and remains well below the target of 2%.

Traders took the disappointing growth and inflation data to imply that the Fed will have to wait longer before raising interest rates, perhaps until 2016. Higher rates have the potential to slow growth further and make U.S. exports even less competitive overseas by boosting the dollar. A stronger dollar weighs on gold and other commodities by making them more expensive to holders of other currencies

Equities sold off after the GDP release, with the Dow plunging more than 250 points, or nearly 1.5%, and the Global Dow falling more than 1.1% as investors shed risk for safety.

The other precious metals tracked higher with gold. Silver gained 2.6% to close out January with a 10% gain, the most in a month since June. Platinum added 1.7% today and 2.4% this month. Outlier palladium, more directly tied to industry, edged up 0.1% today but lost 3.3% in January.

At the Comex close: April gold jumped $23.85 to $1,279.20; March silver gained 44 cents to $17.208; April platinum rose $20.70 to $1,238.20; and March palladium edged up 77 cents to $772.40 an ounce.