Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.4%, reversing initial gains, after Spain denied reports that it would request a bailout from the ECB this weekend. The ECB is ready to begin buying Spain's debt in order to lower its borrowing costs and stabilize the spreading eurozone debt crisis. But Prime Minister Rajoy must formally request the aid, which he is loath to do because it comes with deeply unpopular fiscal constraints. After Reuters reported a request was imminent, equities and gold initially rallied, in part because the bailout is seen as a form of easing that raises the risk of long-term inflation. Spain's denial of the deal, however, killed the rallies and helped to pushed global equities and gold lower. Silver tracked gold, dropping 0.8%. Platinum and palladium, which are widely used in automotive catalytic converters, gained 0.1% and 1.3%, respectively, on upbeat U.S. car sales.

At the Comex close: December slipped $7.70 to $1,775.60; December silver fell 28 cents to $34.67; January platinum added $1.40 to $1,687.20; and December palladium jumped $8.60 to $654.20 an ounce.

Pacific Investment Management Co, or PIMCO, the world's largest manager of bond funds, published a white paper today emphatically recommending gold as an investment in the wake of the Fed's decision to begin QE3. "Given current valuations and central bank policies," PIMCO says, "we see gold as a compelling inflation hedge and store of value that is potentially superior to fiat currencies." The report argues that gold should be considered as categorically different from stocks, bonds, and paper currencies since it "maintains its real value over time" and is not devalued by inflation. PIMCO concludes that gold is still undervalued today because the gold price remains well under its inflation-adjusted peak from 1980, and rising per capita GDP in the U.S. and, especially, China since 1980 makes it relatively more affordable for individual investors. We highly recommend reading this report in its entirety on the PIMCO website.