Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.6%, marking seven straight losing sessions, after the dollar rallied to its highest level since 2008 behind upbeat economic data and a chorus of Fed officials calling for reductions in monetary easing. Consumer sentiment rose to a six-year high this month, signaling greater optimism that the U.S. recovery is on track despite spending cuts and higher taxes. The Conference Board reported that the index of leading economic indicators climbed last month after a steep decline in March. The S&P 500 surged by 1% on the data and the Dow added 120 points, reducing demand for safe-haven assets like precious metals. Silver dropped 1.4% and platinum fell 1.2% while palladium finished virtually unchanged.

At the Comex close: June gold ropped $22.20 to $1,364.70; July silver lost 31 cents to $22.35; July platinum slid $17.60 to $1,468; and June palladium dipped 50 cents to $740.25 an ounce.

Gold was further pressured, and the dollar supported, by new calls from regional Fed Presidents to begin withdrawing monetary stimulus. Richard Fisher of Dallas, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond, and John Williams of San Francisco all said separately that the time is nigh to begin tapering the bond-buying program known as quantitative easing. Tantamount to printing money, QE has helped to boost the gold price by 60% since 2008 because it devalues the dollar and increases the risk of long-term inflation.

On the other hand, Minneapolis Fed President Narayana Kocherlakota, arguably the most dovish member of the FOMC, today called for increasing monetary easing to force down interest rates and unemployment. And Eric Rosen of the Boston Fed said quantitative easing should continue at current levels. While Fed Chair Ben Bernanke has given no indication of supporting reductions in stimulus, currency traders scrambled to position themselves for its possible end, further bidding up the dollar and driving down gold prices. Gold is pressured by a stronger dollar because it is denominated in dollars internationally and becomes more expensive for holders of other currencies.