Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold added another 0.3%, gaining for the fourth day out of five, as soft economic data raised expectations of additional stimulus in China. Factory output slowed in the world's second largest economy, hitting a three-year low, while both business investment and retails sales fell short of targets. Chinese consumer inflation dropped to 1.8% in July, the lowest in thirty months, setting the stage for substantial monetary easing from China's central bank. Additional easing in China would stimulate international trade by lowering prices of Chinese exports and spurring consumer spending. It could also raise gold prices by increasing demand for commodities and driving up the risk of long-term global inflation. The other precious metals also edged up, with silver gaining 0.1%, platinum 0.2%, and palladium under 0.1%

At the close: December gold added $4.20 to $1,620.20; September silver gained 2 cents, to $28.10; October platinum picked up $2.60 to $1,412.80; and September palladium inched up 20 cents to $586.70 an ounce.

Traders appear to be less convinced that ECB president Mario Drahgi will be able to follow through on his recent promises to do "whatever it takes" to save the euro, including direct purchases of sovereign debt. After rallying strongly on last week's pep talks from Drahgi and other finance ministers, the euro is falling and the dollar rising once again as investors seek refuge from the eurozone debt crisis. Typically, a stronger dollar pressures gold, which is denominated in dollars and becomes more expensive to holders of other currencies. But for a second day, gold rose with the dollar, seeing demand from both its commodity and safe-haven sides. If China enacts aggressive monetary stimulus, both the Fed and ECB may be pressured to follow suit, if only to keep their currencies cheap enough to give their exports a chance to compete, which will open the door for substantially higher gold prices.