Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.4% as the U.S. House passed an extension of the debt ceiling until mid-May. The dollar and domestic equities rallied on the bill, which defers the possibility of a government shutdown and credit downgrade for four more months. A rising dollar often pressures gold and other commodities that are denominated in dollars internationally because it makes them more expensive for holders of other currencies. Platinum and palladium fell 0.4% and 0.5%, respectively, while silver bucked the trend by gaining 0.8%.

At the Comex close: February gold slipped $6.50 to $1,686.70; March silver rose 26 cents to $32.44; April platinum dropped $6.70 to $1,691.80; and March palladium lost $3.70 to $726.20 an ounce.

Thomson Reuters data released today shows that gold captured by far the lion�s share of investment money flowing into U.S. commodity ETFs in 2012. Out of a total of $11 billion added to commodity ETFs last year, nearly $8 billion went to SPDR Gold Trust and iShares Gold alone, the two largest bullion-backed ETFs. Asia�s Standard Bank Gold Physical Flow Index shows demand for physical bullion climbing this month to its highest level since November. Loose monetary policies are driving investors into gold as a hedge against devalued currencies and the growing risk of long-term inflation.

Monetary easing by major central banks is now sparking fears of a 1930s-style currency war. Jen Weidmann, the president of Germany�s Bundesbank, warned today that central banks are coming under increased political pressure to devalue their currencies in order to make exports more competitive. In turn, he says, they run the risk of unleashing a global inflationary spiral.

Weidmann is the latest in a series of prominent finance minster who are sounding the alarm over the growing trend of �beggar-thy-neighbor� devaluations. The Bank of England�s Sir Mervyn King, St. Louis Fed President James Bullard, and the ECB�s Benoit Coeure have all made similar statements, which have intensified following Japan�s announcement yesterday of opening-ended quantitative easing and the Fed�s similar announcement in December. Russia, South Korea, Chile, Thailand, Malaysia, and Sweden, among others, have signaled that they may follow suit, while the People�s Bank of China and ECB have long made their easing intentions known. The end-result, according to Marketwatch, could be the wholesale loss of confidence in paper currencies. As the global currency of last resort, gold would be the primary beneficiary.