Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold advanced 0.1% and the dollar weakened as European debt concerns eased slightly and risk assets rose. Spain's debt auction late yesterday brought more interest than expected, although not much; the IMF modestly raised its global growth forecast to 3.3% to 3.5%; and Germany's investor confidence unexpectedly improved. This news helped to offset yesterday's fears of a deepening crisis in Spain and encourage a strong rally in U.S. and global equities, pulling commodities and precious metals higher. Silver gained 1%, platinum 0.6%, and palladium 1.6%.

At the close: June gold rose $1.40 to $1,651.10; May silver gained 30 cents to $31.67; July platinum added rose $8.90 to $1,584.70; and June palladium rose $11.25 to $661.95 an ounce.

A precarious balance has settled over Europe. "One has the feeling that at any moment things could well get very bad again," IMF chief economist Olivier Blanchard told Reuters. New governments in Italy, Spain and Greece are pushing through harsh budget reforms and eurozone leaders have agreed to enlarge their bailout fund. But Spain's short-term borrowing costs have almost doubled from a month ago and the IMF does not see Spain meeting its deficit goals this year or next.

Gold is searching for direction, caught between its role as a traditional commodity tracking with equities as the global economy improves, and its role as a safe-haven currency rising when economic worries reignite. In this uneasy calm, an escalation of eurozone debt fears could easily break the link between gold and riskier assets, which has been dominant for several months, and drive gold prices (and the dollar) higher on safe-haven appeal. Similarly, a sharp escalation in oil prices on geopolitical uncertainty, or a string of poor economic news in the U.S., like today's reports that output at U.S. factories slipped in March, could drive investors out of risk assets and back into gold. On the other hand, good economic news could drive another risk rally, pulling gold higher with commodities. From both of its roles, then, gold seems reasonably well-supported at current prices in this somewhat schizoid market.