Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.7% as civil unrest in Spain and Greece sparked a new wave of risk aversion, driving investors into cash and Treasuries. Riots erupted in Athens during strikes over deeper cuts in wages and services required by the EU, IMF, and ECB if Greece is to receive the aid it needs to remain in the euro. Violent protests over austerity also wracked Madrid, driven by Spain's deepening debt problems. With investors fearing that Spain and the eurozone are slipping out of control, Spanish borrowing costs spiked higher and European equity markets plummeted. The dollar and U.S. Treasuries rose as investors sought safety and liquidity, pressuring gold. Silver finished almost flat and platinum gained 0.2% while palladium, still correcting from strike-inflated levels, dropped 2.3%.

At the close: December gold fell $12.80 to $1,753.60; December silver lost 1 cent to $33.94; October platinum added $2.60 to $1,634.40; and December palladium dropped $15 to $625.85 an ounce.

Following yesterday's bashing of QE3 by Philadelphia Fed President Charles Plosser, which pressured the gold and equity markets, two more Fed presidents rallied to its defense. San Francisco Fed's John Williams, a top policy maker, said he expects QE3 to be expanded next year and continue through most of 2014 because of tenacious unemployment and low risk of short-term inflation. Chicago Fed's Charles Evans also called for more action, saying we risk "a lost decade similar to that which Japan experienced in the 1990s." Evans is calling for near-zero interest rates to continue until unemployment falls to 7% or inflation rises to 3%.

With the printing presses barely inked up for QE3, expectations are already growing for yet another round of monetary easing, known as QE3.5. Fed-watchers say the new program is likely to begin in December, according to Marketwatch, and will include direct purchases of Treasury bonds in addition to the monthly $40 billion in mortgage-backed securities under QE3. Perhaps this is the expansion that John Williams has in mind or perhaps there's even more to come. Many analysts foresee QE3 driving gold prices to new record highs within twelve months because of currency debasement and the threat of long-term inflation. QE3.5 and beyond should only push gold higher still.