Daily Gold Update

Source: American Gold Exchange

Austin— Gold was down 1% today as pessimistic news from the eurozone bolstered the dollar and spurred investors to take profits after gold's 1.4% gain yesterday. Another missed deadline for a Greek debt deal weighed on the euro and commodities. Silver lost 1.3%, although platinum and palladium gained on supply disruptions because of striking South African miners. Gold is still up by 11% for 2012, supported largely by the Fed's pledge of near-zero interest rates through 2014 and expectations of QE3 this spring.

At the Comex close: April gold dropped $17.10 to $1,731.30; March silver lost 49 cents to $33.70; April platinum gained $13.30 to $1,668.10; and April palladium advanced $5.40 to $714.55 an ounce.

Investors have grown very weary of the hot-and-cold-running efforts to fix the eurozone. Part of the problem is that its myriad woes are moving targets. Now S&P says that even if private creditors agree to 70% losses on their bonds, it won�t be enough to enable Greece to reach sustainable debt levels. More central banks will have to take even greater losses, which is politically difficult. S&P also warned that credit conditions in Italy and France, which were downgraded last month, are still deteriorating despite the huge transfusion of cheap money provided by the ECB. And German exports fell precipitously in December, four times more than expected, in a scary sign that the debt crisis is dragging down Europe's strongest economy.

The prospects for QE3 got another boost today when San Francisco Fed president John Williams asserted that another round of asset purchases "would likely be the best way to provide a boost to the economy" despite recent job growth. Williams is a voting member of the FOMC so his opinion counts. As we discussed last week, gold has been correlating more highly with risk than in 2011, when it was more a safe-haven asset. Loose monetary policies in China, Europe, and the U.S. should encourage gold prices to rise alongside of equities and commodities this year, especially as the inflationary ramifications of quantitative easing come to the foreground.