Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold surged 3.7% as an awful non-farms payroll report combined with slowing ISM data to confirm a declining trend in the U.S. economy and increase the odds of additional easing by the Fed. Employers added only 69,000 jobs in May, the smallest number in a year and less than half of the amount forecast, driving the unemployment rate back up to 8.2%. April's revised jobs numbers were slashed to 77,000 from 115,000, already abysmal, and March's were also revised lower. U.S. equities plummeted more than 2% and the Dow went negative for the year. The other precious metals followed gold higher with silver gaining 2.7%, platinum 1.2%, and palladium 0.5%.

At the close: August gold surged $57.90 to $1,622.10; July silver gained 76 cents to $28.51; July platinum added $15.60 to $1,433.20; and September palladium picked up 10 cents to $614 an ounce.

Today's NFP report was far worse than anyone expected and could mean another round of quantitative easing (QE3) as early as the FOMC meeting on June 19. The conditions justifying QE3 have been spelled out by Fed Chair Ben Bernanke: higher unemployment, increased risks to growth, and reduced risk of inflation. These criteria were reiterated by New York Fed President William Dudley in a speech just yesterday. With payrolls in a shocking downtrend, manufacturing slowing, the eurozone debt crisis and recession deepening, China and India slumping, oil prices falling, and April inflation flat, these criteria are easily met. As Dean Maki, chief U.S. economist at Barclays and a former Fed economist, told Bloomberg today: �The May report does significantly raise the odds of further easing from the Fed. There will be a case made at the June meeting for easing.�

The Fed wouldn�t be the only central bank to engage in a new round of printing money. Britain's deep manufacturing pullback is expected to push the Bank of England into more stimulus as soon as next week. ECB officials said today that additional easing via their Long Term Refinancing Operation (LTRO) is back on the table because of record-high unemployment and the deepening economic contraction in the eurozone. Last week, China indicated a possible stimulus of two trillion yuan to reinvigorate its faltering economy. And the Bank of Japan may intervene to weaken its currency further. Everybody's doing it. QE3 would strongly suppress the dollar and support gold. After QE1 and QE2, gold surged by more than 85%. Another round could easily drive it to new all-time highs this year.