Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold tumbled 1.5% as positive trade data and Fed comments about monetary stimulus caused a minor technical sell-off. The U.S. trade deficit dropped in June to its lowest level in nearly four years behind rising exports, suggesting economic growth in the second half may be stronger than forecast. Traders viewed the trade gap as more evidence that the Fed will begin to taper quantitative easing this fall. Once technical support at $1,300 was breached, automatic stop-loss selling drove gold to as low as $1,278 before it bounced to close above $1,282 for its sixth straight down session.

Gold sentiment was also weakened after Chicago Fed President Charles Evans said it is "quite likely" that the Fed will begin slowing asset purchases in coming months because economic fundamentals �are actually really better" than earlier this year. Evans is a voting member of the FOMC and well-known advocate of quantitative easing. Separately, Dennis Lockhart of the Atlanta Fed said the QE taper could begin as early as September, although he wouldn't rule out October or December, if monthly job growth is in the 180,000 to 200,000 range.

U.S. and global equities also fell sharply on the taper talk, with the Dow losing nearly 100 points and the Global Dow dropping almost half a percent. QE has supported higher gold and equities prices by flooding the economy with cheap liquidity, undermining the dollar value. The other precious metals also fell, with silver dropping 1%, platinum 1.4%, and palladium 1.7%.

At the Comex close: December gold tumbled $19.90 to $1,282.50; September silver shed 20 cents to $19.52; October platinum dropped $20.30 to $1,427.80; and September palladium surrendered $12.40 to $722.80 an ounce.