Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold dipped 0.2% as the dollar strengthened behind increasing worries about the eurozone economy and sovereign debt crisis. Factory output fell in May across the 17-nation region, extending the contraction to a seventh straight quarter. France's credit rating was downgraded one step by Fitch Ratings to AA+ because of excessive government debt. And Portuguese 10-year bond yields rose again because of concerns about the viability of its $102 billion bailout program. The dollar advanced on safe haven inflows, pressuring gold and other commodities that are denominated in dollars internationally.

Nonetheless, gold finished the week with gains of 5.4%, the most since late October 2011, after Fed Chair Ben Bernanke reassured the markets that monetary policy will remain extremely loose for a long time to come. Gold had come under serious pressure in recent weeks on the speculation that the central bank would begin reducing quantitative easing in coming months, but this pressure appears to be lifting. QE has supported higher gold prices by flooding the economy with liquidity, undermining the value of the dollar and increasing the risk of long-term inflation. The other precious metals were mixed. Silver lost 0.8% today but gained 5.6% on the week. Platinum finished the session virtually flat while palladium rose 0.7%. Both PMGs enjoyed 6% weekly gains, supported by supply concerns over strikes in South Africa

At the Comex close: August gold slipped $2.30 to $1,277.60; September silver SIU3 -dropped 16 cents to $19.79; October platinum dipped 70 cents to $1,406.90; and September palladium gained $4.70 to $722.90 an ounce.

Following Bernanke's reassurances, gold traders are at their most bullish in five weeks, according to a Bloomberg survey, as prospects brighten for continued easing. St. Louis Fed President James Bullard called today for increasing QE beyond its current level of $85 billion per month if the inflation index for personal consumption, the Fed's preferred measure, falls below 1% annualized. It was right at 1% annualized in May.