Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Excahnge

Austin— Gold dropped 1.4%, retreating from a two-week high, after mixed economic data triggered end-of-month liquidations and rallied the dollar. U.S. consumer spending fell in April for the first time in nearly a year, indicating a potential soft spot in the recovery. But consumer sentiment jumped in May to its highest level in six years, driven by rising stock and housing prices. And U.S. business activity expanded by the most in a year. Equities fell hard, with the S&P 500 losing nearly 1.5% and the Global Dow 1.2%, as traders shifted into cash to square their books for the month.

The upbeat reports prompted new speculation that the Fed may reduce quantitative easing in coming months. QE has driven a record-breaking rally in equities by flooding the market with cheap money and encouraging risk-taking. It has also supported a 60% rise in gold since 2008 because it devalues the dollar and raises inflation expectations. The dollar rallied against most rivals, boosted by reports that eurozone unemployment rose to a record-high 12.2%.A rising dollar weighs on the price of gold and other commodities because they are denominated in dollars internationally and become more expensive for holders of other currencies. Gold finished the month down 5.4%. Silver dropped 2% today while platinum and palladium fell 1.4% and 0.9%, respectively.

At the Comex close: August gold dropped $19, or 1.4%, to settle at $1,393; July silver lost 45 cents to $22.24; July platinum fell $20.90 to $1,461.80; and September palladium slid $6.90to $753.65 an ounce.