Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold dropped 1%, slipping back below $1,400 after closing at a two-week high yesterday, as the dollar strengthened and India restricted gold imports. The dollar rose against most major rivals because of technical trading more so than fundamentals, bouncing off yesterday's substantial sell-off. But the buck was also lightly supported by comments from two Fed presidents, John Williams of San Francisco and Dennis Lockhart of Atlanta, who said separately that the bond-buying program known as quantitative easing could begin to taper this summer if economic data turned positive. Kansas City Fed President Esther George, a hardcore critic of the program, also called for slowing.

On the other hand, Sarah Bloom Raskin, a governor of the Fed's influential board, said economy needs to create many more jobs before it can fully heal. This Friday's non-farms payroll report could be an important weathervane for monetary policy, given Ben Bernanke's commitment to driving down unemployment with stimulus. Economists polled by Reuters expect job gains to be lackluster, putting a damper on talk of tapering for now. The precious metals followed gold lower, with silver falling 1.4%, platinum 0.4%, and palladium 1.1%

At the Comex close: August gold dropped $14.70 to $1,397.20; July silver fell 31 cents to end at $22.41; July platinum lost $6.30 to $1,491.10; and September palladiumslipped by $8 to $751.05 an ounce.

Also weighing on gold today was the announcement by the Reserve Bank of India that gold imports would be restricted in order to reduce India's current account deficit. Indian gold imports jumped to around 162 tons in May from 142 tons in April, which was already a massive increase, as lower prices created a buying frenzy for gold jewelry, coin, and bars. The curb is expected to raise prices and reduce short-term demand in India, the world's largest consumer of gold.