Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rallied 0.6% to close at $1,780 for the first time since late February as an agreement to rescue Spain's failing banks appears to be on the horizon. The Spanish government has been reluctant to formally request a bailout because it believes the conditions required by the EU, including substantial fiscal reforms, would be too onerous and politically risky. According to the Financial Times, EU officials and Prime Minister Rajoy are negotiating terms that will allow the ECB and ESM, the eurozone's main bailout mechanism, to buy Spanish debt and lower borrowing costs, which should stabilize the euro and prevent debt contagion in the eurozone. U.S. and global equities rallied on the news while the dollar dropped. Gold was also supported by expectations of a miner's strike in South Africa next week. The other precious metals followed gold's lead, with silver up 0.2%, platinum up 0.8%, and palladium up 1.6%.

At the close: December gold rallied $9.80 to $1,780; December silver added 7 cents, to $34.75; October platinum rose $13.40 to $1,637.30; and December palladium gained $10.85 to $671.95 an ounce.

Holdings in gold-backed exchange-traded products (ETPs) reached a record 2,523.7 tons yesterday, with investors buying more than 115 tons this quarter, the most since mid-2010. Consensus is building among major banks that new record highs are in the cards. Credit Suisse, Deutsche Bank AG, Standard Charter, and Bank of America all have said in the past week that gold will rise over $2,000 by next year, according to Bloomberg, with the latter also predicting prices over $2,400 within two years.

And finally, as measured by GLD, the leading gold bullion ETF, the gold price is now presenting a "golden cross," in which its 50-day moving average price has crossed above its 200-day moving average. Most market technicians view this event as strongly bullish because it means gold is breaking sharply above its trend and gathering momentum. The yellow metal has gained nearly 14% so far this year, and September is shaping up to be a pivitol month for the next phase of this bull market.