Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 0.4% as positive U.S. economic data rallied the dollar. Consumer confidence jumped this month to its highest level since 2008, boosted by optimism over employment prospects. In addition, manufacturing hit a six-month high outside of the volatile defense and transportation sectors, indicating that the fiscal cliff is slowing the economy less than feared. The news caused the dollar to rebound after initially dropping in the wake of the eurozone debt deal, announced last night, granting Greece some $56 billion in additional aid. A rising dollar suppresses the price of gold because the metal is denominated in dollar internationally, making it more expensive in other currencies. Silver fell 0.5% while platinum and palladium, with wider industrial applications, rose 0.5% and 1.1%, respectively.

At the Comex close: December gold dropped $7.30 to $1,742.30; December silver fell 16 cents to $33.98; January platinum for gained $7.50 to $1,618.50; and December palladium added $7, to $668.20 an ounce.

The dollar is enjoying a minor rally for two main reasons: worries about the pending fiscal cliff are driving safe-haven monies into U.S. Treasury bonds, which must be purchased with dollars by international investors; and other economies�and their currencies�are in even worse shape. Interest rate differentials have begun to slightly favor the dollar as the eurozone, Japan, and Great Britain roll back their rates. And the OECD warned today that failure to find a timely solution to the fiscal cliff could trigger a global recession. Budget negotiations in Congress have stalled along party lines, helping to drive global equities lower today.

Despite the stronger dollar, hedge funds and other large speculators have increased their bullish bets on gold, according to Reuters, with open interest in gold futures near a 2012 high despite Friday's rally above $1,750. In addition, gold demand in India is expected to increase by 23% this year, driven by festival-buying and economic growth. Along with China, India is the world's largest gold consumer, so its rising demand is expected to boost the global gold price.