Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 1%, but still finished the week with a 0.7% gain, after strong Chinese inflation appeared to undercut the prospects for additional stimulus in the world's second-largest economy. Consumer prices in China rose to a seven-month high and the CPI jumped from 2% to 2.5%, mainly because of surging food prices. Although well-below the government's target of 3.5%, the data still caused traders to fear a possible curtailment of easing in China, which could slow economic growth elsewhere and reduce commodity-demand for precious metals. Silver dropped 1.7% but finished the week with a 1.5% gain. Platinum and palladium slipped 0.2% and 0.1%, respectively, but notched impressive weekly gains of 4.7% and 1.9%.

At the Comex close: February gold lost $17.40 to $1,660.60; March silver fell 51 cents to $30.41; April platinum slipped $3.10 to $1,631.20; and March palladium dipped 75 cents to $701.45 an ounce.

Analysts polled by the London Bullion Market Association expect gold to reach to a high of $1,914 in 2013, just below its all-time record of $1,921. They project a record-high average price of $1,753, nearly $100 per ounce higher than last year's average of $1,669, itself a record. The main drivers, according to the analysts surveyed, will be continuing negative real interest rates and monetary easing from the world's major central banks.

Minnesota Fed President Narayana Kocherlakota warned today that the current scope of monetary easing in the U.S. may be insufficient to promote economic growth and reduce unemployment. Considered a moderate on the FOMC, Kocherlakota argued against more quantitative easing as recently as last June, but he has since become a strong and influential advocate. His statement comes just a week after the minutes from the Fed's meeting in December caused a knee-jerk sell-off in the gold market by suggesting that QE3 might end sometime this year. QE has helped to double the gold price since 2008 because it devalues the dollar and increases the risk of long-term inflation.