Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.2% in light trading as pressure on the euro eased slightly, reducing safe-haven demand. Many traders remained on the sidelines awaiting word from the Fed on possible changes in monetary policy, expected at Ben Bernanke's post-FOMC press conference tomorrow. Germany has agreed to allow eurozone bailout mechanisms to buy the debt of member nations directly, a move it had long resisted. Seen as part of a concerted effort by central bankers to stem the crisis, this change is intended to reduce skyrocketing borrowing costs for Italy and Spain and perhaps keep the euro intact. The euro promptly gained 1.2% and risk assets rallied, with the Dow gaining nearly 1% and the Global Dow 1.5%. Silver fell 1.1%, platinum 0.2%, and palladium 0.6%.

At the close: August gold lost $3.80to $1,623.20; July silver dropped 30 cents to $28.37; July platinum slid $3.60 to $1,480.50; and September palladium fell $3.75 to settle at $629.40 an ounce.

In meetings today and tomorrow, the Fed will debate how to intervene with new monetary policies to support the flagging U.S. economy and protect it from eurozone fallout. As we said yesterday, it could either renew Operation Twist, its program of exchanging short-term for long-term securities, or undertake a third round quantitative easing (QE3). The later is more bullish for gold because it is, in effect, effectively printing money, which debases the dollar and increases long-term inflation risk. Either way, gold's longer-term environment remains bullish because historically low interest rates and loose monetary policies in Europe, China, Japan, Britain, and the U.S. will be the norm for years to come.