Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold traded flat, dropping less than 0.1% at the close before pushing back to even after hours, as conflicting signals about global growth neutralized yesterday's momentum. The U.S. economy grew more than forecast in the third quarter as GDP rose 2%, up from 1.3% in the previous quarter, behind higher consumer spending. And the Thomson Reuters/University of Michigan consumer sentiment index climbed to its highest level since September 2007. But lackluster corporate earnings, falling business investment, and deepening eurozone worries kept optimism in check. Spanish unemployment climbed to a record 25% and Germany warned that Greece still might be forced to exit the euro. Treasuries rallied on safe-haven inflows and the dollar rose, pressuring gold, which posted a weekly loss of 0.7%. Silver dropped 0.1% today while platinum and palladium each lost 1.5%.

At the Comex close: December gold dipped $1.10 to $1,711.90; December silver slipped 4 cents to $32.04; January platinum lost $22.80 to $1,546; and December palladium fell $9.10 to $595.40 an ounce.

Despite this week's softness in gold, analysts are increasingly bullish about its prospects. More than half the traders in today's Bloomberg survey expect prices to rise next week, and bullish bets in hedge funds are near a one-year high. Holdings in bullion-backed exchange-traded products (ETPs) rose to an all-time high of more than 2,585 tons yesterday, according to Bloomberg. Additional monetary easing from China, Europe, Japan, and the U.S. is expected to increase the long-term risk of inflation and undermine paper currencies, driving the gold price higher. And the growing trend of global central banks buying gold as a reserve currency is expected to support gold prices in coming years.

In addition, the UN Conference on Trade and Development recently reported that China has surpassed the U.S. as the world�s largest recipient of foreign direct investments. If this trend continues, which is not unlikely, since China's economic growth is far outpacing that of the U.S., the dollar's dominance in the international marketplace may suffer. A weaker dollar supports higher gold prices because gold is denominated internationally in dollars, making it less expensive in other currencies.