Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold edged slightly higher on a mild up-tick in risk appetite following today's meeting between congressional leaders and the President about the so-called fiscal cliff. The Dow gained 0.4% after House Speaker John Boehner described opening budget discussions as "constructive." Concerns that Congress will fail to reach an agreement before January 1, when $600 billion in tax increases and budget cuts will happen automatically, recently hammered U.S. stocks into their worst correction since June. Gold was caught in the sell-off as investors sought liquidity. The dollar rallied to a two-month high on safe-haven worries, pressuring gold's gains today and contributing to its weekly loss of 0.9%. Silver lost 0.9% today for a 0.7% weekly loss. Sister metals platinum and palladium fell 0.7% and 0.8% for the day, respectively, but finished the week with gains of 0.2% and 2.5%, lifted by a Johnson Matthey report predicting supply shortages next year.

At the Comex close: December gold for gained 90 cents to $1,714.70; December silver fell 30 cents to $32.37; January platinum lost $11.50 to $1,561.80; and December palladium fell $4.75 to $626.45 an ounce.

Softer U.S. economic data may increase the likelihood that the Fed will expand QE3, perhaps as early as December. The ECRI Weekly Leading Index, which measures future U.S. economic growth, fell to its lowest reading in two months, in part because of the looming fiscal cliff. Jobless claims have spiked higher and factory output has fallen dramatically, especially in the Northeast in the wake of Hurricane Sandy. Atlanta Fed President Dennis Lockhart is calling for more aggressive central bank policies: �I expect that continued aggressive use of balance sheet monetary tools will be appropriate and justified by economic conditions for some time even if fiscal cliff issues are properly addressed,� he said in a speech in Charlottesville today. The Minneapolis Fed's Narayana Kocherlakota and the San Francisco Fed's John Williams recently made similar statements. And the minutes of the recent FOMC meeting, released this week, indicate growing support for buying more long-term securities for the Fed's balance sheet, which is effectively printing money. More easing will be bullish for gold because it weakens the dollar and increases the risk of long-term inflation.

Thomson Reuters GFMS, a global consultancy, released its Interim Silver Market Review today, saying that silver prices are set to rally and could reach a new all-time high of around $50 an ounce in 2013. Rising investor demand in response to monetary easing by central banks around the world will drive higher prices, according to GFMS.