Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.3% on improving prospects for U.S employment and deepening gloom in the eurozone. Jobless claims fell to a four-year low last week, boosting risk-appetite and driving down the dollar and U.S. Treasuries. A falling dollar increases demand for gold because it becomes less expensive for holders off other currencies. Gold received additional support after S&P downgraded Spain's credit rating to one step above junk, causing a sell-off in Spanish bonds and sending investors into safe-haven gold. Moody's is also weighing another downgrade of Spain. Platinum and palladium followed gold higher, gaining 0.7% and o.2%, respectively, while silver slipped 0.1% lower.

At the Comex close: December gold added $5.50 to $1,770.60 December silver slipped 3 cents to $34.08; January platinum rose $11.10 to $1,689.60; December palladium picked up $1 to $650.90 an ounce.

The worsening news about Spanish debt is bullish for gold not simply because it boosts demand for the metal as wealth-protection, but also because it increases the likelihood that Spain will request a bailout from the ECB. Spanish Prime Minister Rajoy has been loath to request aid because it comes with politically undesirable strings. But with Spain's sovereign credit nearing bottom, and with yields and insurance costs rising again on Spanish debt, he may soon have no choice. Gold is positioned for a lift from the ECB's program because the intervention would encourage risk appetite in the eurozone. Seeing measures taken to control the crisis, investors would likley shift safe-haven monies out of the dollar; a falling dollar supports higher gold prices. In addition, because the ECB program is tantamount to quantitative easing, it will increase the long-term risk of inflation, which is also bullish for gold.