Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold dropped 0.6% to a six-week low above $1,635 as new evidence of recession in the eurozone boosted the dollar. Last quarter, the beleaguered region suffered its biggest economic slump in almost four years, with GDP dropping 0.6%, according to European Union statistics. Germany, France, and Italy�the three largest economies�all shrank more than forecast, increasing expectations that the ECB will cut interest rates to below zero in order to jump-start growth. The euro tumbled on the news and the dollar rallied, pressuring precious metals, which are denominated in dollars internationally and become more expensive to holders of other currencies when the dollar strengthens. Silver fell 1.7% while sister metals platinum and palladium lost 1.1% and 1%, respectively.

At the Comex close: April gold dropped $9.60 to $1,635.50; March silver fell 52 cents to $30.35; April platinum lost $18.80 to $1,710.90; and March palladium slid $8 to $764.05 an ounce.

The World Gold Council today released its Gold Demand Trends for 2012, showing that gold demand in value terms reached an all-time high above $236 billion last year. The overall volume of demand decreased by 4%, however, as larger purchases by institutions and central banks only partly offset a decline in consumer demand, primarily for jewelry in India, where overall demand dropped by 12% last year. Still India remained the world's biggest gold buyer after consumption jumped 41% in the fourth quarter, with China following closely behind. The WGC forecasts Indian and Chinese demand will increase by 11% and 13% in 2013, respectively, as their economies accelerate.

The WGC report showed purchases by the world's central banks rising 17% last year to more than more 534 tons, the most since 1964. Along with the growth of "whatever-it-takes" central bank activism and global monetary easing, the WGC expects this trend to accelerate in 2013. Governments are increasingly seeking to devalue their currencies, and they are using gold to diversify away from an over-reliance on the euro and dollar. Along these lines, as CNBC reported today, the dollar has shrunk to a 15-year low as a percentage of the world's currency supply, raising concerns that its long run as the world's premier currency is ending. More and more countries are willing to use other currencies for trade. If this trend away from the dollar continues, gold is likely to become a major beneficiary as the pre-eminent international store of value.