Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austiin— Gold dropped 0.9% to close at $1,218 after stronger-than-expected U.S. retail sales boosted the dollar and reduced demand for alternative stores of value.

Consumer spending on retail items rose 0.7% in November, the most in eight months, lifting forecasts for economic growth in the fourth quarter. The data was somewhat surprising after retail spending over Thanksgiving weekend, which typically signals the start of holiday shopping, came in substantially slower than expected. Retail sales are an important component in overall consumer spending, which comprises around 70% of the economy. Among economists polled by Marketwatch, average GDP growth estimates rose for Q4 to 2.2% from 1.9% as a result of the report.

After three days of declines, the dollar rose on speculation that upbeat retailing data will encourage the Fed to revise its forward guidance on raising interest rates when it meets next week. A stronger dollar weighs on gold and other commodities denominated in it for international trade by making them more expensive to users of other currencies.

The dollar was also supported by reports that the ECB is falling short in efforts to expand its balance sheet by a trillion euros via its current asset-buying programs, increasing the likelihood that full-scale quantitative easing is coming early next year to help boost inflation. Tantamount to printing money, QE will devalue the euro and, by extension, help the dollar. It is also expected to build demand for gold as a currency hedge in the Eurozone.

The other precious metals tracked lower with gold. Silver fell 1% while platinum and palladium slid 0.8% and 0.4%, respectively.

At the Comex close: February gold dropped $11.40 to $1,218,00; March silver fell 17 cents to $17.02; January platinum slid $9.30 to $1,233.30; and March palladium slid lost $3.40 to $818.00 an ounce.