Daily Gold Update

Source: American Gold Exchange

Austin— Gold lost ground for a third straight session as a surprise 10 million-yen-round of quantitative easing in Japan and a slew of bad eurozone news spurred a dollar rally. Because gold is denominated in dollars, the gold price tends to drop as the dollar strengthens. Also weighing on gold was a report that U.S. retail sales fell short of forecasts, which undermined risk appetite and also dragged equities lower. Gold has been correlating with risk in recent weeks. Gold lost 0.4% and silver 1.1%, while platinum and palladium, more sensitive to macroeconomic influences upon industrial demand, led the declines with losses of 1.3% and 1.6%, respectively.

At the closes: April dropped $7.20 to $1,717.70; March silver lost 37 cents to $33.35; April platinum fell $21.70 to $1,628; and March palladium sank $11.30 to $687.25 an ounce.

The hits keep coming in Europe. Late yesterday, Moody's cut the debt ratings of six European nations including Italy, Spain, and Portugal, saying �The uncertainty over the euro area�s prospects for institutional reform of its fiscal and economic framework� requires a revised negative outlook for the region. Spain dropped by two notches, the others by one. Moody's also advised that France, Britain, and Austria may lose their AAA ratings. The euro and pound sterling both dropped on the news while the dollar index jumped 0.6%.

We said yesterday that Greece's bailout had high hurdles to clear before approval by increasingly skeptical EU ministers. Today, the Financial Times reported that tomorrow's emergency meeting has been called off, raising the possibility of Greek default. The nations that retain their AAA ratings�Germany, Holland, and Finland�have little faith that Greece will enact the promised reforms. Olli Rehn, top economics official for the European Council, warns there will be �devastating consequences� if Greece defaults. "We're getting closer to default," added a eurozone official. As we've said before, a default by Greece is likely to drive the dollar higher, perhaps at gold's expense in the short term. But we'd expect a much higher gold price in the longer term as investors seek safe havens with greater upside, and central bankers on both sides of the Atlantic enact more easing measures to offset the crisis.