Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold dropped 1.1% from its previous close, finishing today's session at just under $1,244, a four-month low, as traders digested the hawkish minutes from the last FOMC meeting. But today's session-losses really occurred in electronic trade late yesterday after the Fed minutes were released and prices fell as low as $1,241. Today, gold effectively consolidated those losses, even rebounding slightly, as tentative support was established above $1,240.

Yesterday's after-hours losses were triggered by suggestions in the Fed minutes that the taper of monetary stimulus may begin sooner than expected, perhaps as early as next month. That sentiment was reinforced today by two bullish economic reports. Jobless claims fell more than forecast to their lowest level in almost two months; and the Markit flash PMI report shows manufacturing rebounding to an eight-month high in November. Risk appetite was stoked by the upbeat news, driving the Dow 100 points higher to close over 16,000 for the first time.

But not all today's data was positive, leading traders to question whether the taper will happen within the next few months after all. The Philadelphia Fed�s manufacturing index fell far more than expected in October, hitting its lowest level since last May. And wholesale prices fell again last month, raising concerns about deflation and giving the Fed more room to provide stimulus.

St. Louis Fed President James Bullard said today that quantitative easing should continue for now at current levels because inflation remains too low at just over 1% and unemployment too high at 7.3%. Tantamount to printing money, QE supports higher gold and equities prices by flooding the economy with liquidity, devaluing the dollar and increasing the risk of long-term inflation.

The other metals also finished lower. Silver and platinum each dropped 0.6% while palladium edged down by less than 0.1%.

At the Comex close: December gold dropped $14.40 to $1,243.60; December silver slid 12 cents to $19.93; January platinum lost $7.90 to $1.391.70; and December palladium dipped 60 cents to $713.25 an ounce.