Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold drifted 0.7% lower as deepening concerns about the global economy drove investors further into liquidity, pushing the dollar index to a two-year high and Treasury yields down near all-time lows. Risk aversion continues to reign because of last week's poor U.S. employment report, the slowdown of China's economy, the lack of substantial solutions to the debt crisis coming out of Europe, and the seeming disinclination of the Fed to undertake more quantitative easing right now. Global stocks fell for a seventh consecutive day, the euro dropped to its lowest level since June 2010, and Spanish and Italian bond yields crept higher. Platinum and palladium lost 1.3% and 1.4%, respectively, while silver bucked the trend and gained 0.5%

At the close: August gold dropped $10.40 to $1,565.30; September silver added 14 cents, to $27.16; October platinum fell $19.10 to $1,412.50; and September palladium lost $8.15 to $574.80 an ounce.

Despite the market's short-term disappointment in the minutes of the June Fed meeting, economists at Bank of America believe the Fed was laying the groundwork for new policy accommodations as soon as September. As reported by Business Insider, BofA's economics team, led by Michael Hanson and Ethan Harris, analyzed the Fed report and concluded: "We expect that the outlook will be weak enough to warrant additional Fed easing by the September 12-13 FOMC meeting; we look for Fed officials to both push out their forward guidance on rates until at least mid-2015 and to launch QE3." As we said yesterday, more Fed officials are now in favor of easing than previously, and they've acknowledged greater downside risks to the economy. Another round of easing will be bullish for gold because it devalues the dollar and increases the risk of long-term inflation. Gold gained more than 85% during QE1 and QE2.