Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.3% to its lowest level since last July as the deepening crisis in Greece drove more investors into cash. Today's trigger was a Reuters report that the ECB has stopped providing liquidity to a number of insolvent Greek banks, adding to fears that Greece itself will soon become insolvent and spread contagion to fiscally weakened nations like Portugal, Ireland, Spain, and Italy. Cash withdrawals from Greek banks are increasing as depositors are losing confidence in the government's ability to fix the nation's finances. The dollar rose for the thirteenth straight session while equities and commodities sold off again. The other precious metals also fell, with silver plummeting 3.2%. Platinum and palladium lost 1% and 1.2%, respectively, after posting mild gains yesterday.

At the close: June gold fell $20.50 to $1,536.60; silver dropped 88 cents to $27.20; July platinum retreated $14.30 to 1,432.20; and June palladium lost $7 to $594.10 an ounce.

The minutes of the last FOMC meeting were released today showing concern over the progress of the recovery and openness to another round of quantitative easing (QE3). Whereas several committee members were confident that growth will continue at a moderate pace, an increasing number "thought it premature to infer a stronger underlying trend," and would support additional easing "if the recovery lost momentum or the downside risks�become great enough." Prices for U.S. Treasurys rose immediately after the Fed minutes were released. QE3 would depress the value of the dollar and lower Treasury yields, driving up prices. It would also drive gold prices up substantially.

In recent years, central banks and sovereign wealth funds have been adding gold to their reserves in record amounts in order to diversify out of currency risk. Now a pension fund in Japan is following suit. The Financial Times reports that Okayama Metal & Machinery has become the first Japanese pension fund to add gold, "in a sign of dwindling faith in paper currencies." Gold is now the considered the third most desirable addition to investment portfolios in Japan, well ahead of investment trusts, bonds, and foreign securities.