Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold broke a four-day winning streak, dropping 0.6% today as positive U.S. economic data clouded the outlook for an announcement of additional monetary stimulus at the FOMC meeting this week. After declining for four straight months, consumer confidence rose in July because of improving optimism about short�term employment prospects. The Chicago PMI rose for the first time in four months, indicating an upswing in Midwest regional manufacturing activity. And U.S. home prices rose for a second month, jumping 2.2% in May. While this new data does little to indicate a rebound, it may prompt the Fed to delay new policy actions until its September meeting in order to track more data. Another round of easing is widely anticipated, and would be bullish for gold because it devalues the dollar and increases long-term inflation risk. Silver tracked gold lower, dropping 0.4%, while platinum and palladium rose by 0.4%.

At the close: August gold slid $9.20 to $1,610.50; September silver dropped 12 cents to $27.91; October platinum rose $5.10 to $1,416.90; and September palladium picked up $2.20 to $590.55 an ounce.

Also weighing on the gold market were concerns that the eurozone may refrain from new actions to remedy its debt crisis at this week's European Central Bank meeting. Last week, after ECB president Mario Drahgi boldly pledged to preserve the euro, gold rallied and the dollar dropped on expectations of a flood of new liquidity. Today, those expectations were severely tempered after Germany all but rejected a proposal to give a banking license to the ESM, the eurozone's bailout facility, which would enable it to draw directly on the ECB to provide billions of euros in aid to Greece, Spain, Italy, and other struggling economies. In the mean time, eurozone unemployment has risen to a record high of 11.2%. The ECB is coming under increased pressure to step in with quantitative easing and other unconventional measures to provide much-needed liquidity, which would increase demand for gold as a safe-haven store of value.