Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold edged up 0.1% to close above $1,726 after reaching an intraday high of $1,730 as another day of mediocre corporate earnings reports caused an up-tick in safe-haven buying. The Dow spent most of the session deep in the red before nudging back into positive territory at the close. The Global Dow dropped another 0.2% and oil tumbled almost 2% after car bomb in Beirut killed a Lebanese official, stoking Middle East tension. Silver outpaced gold, picking up 0.5%, while platinum and palladium lost 0.2% and 0.1%, respectively.

At the Comex close: December gold added $2.30 to $1,726.30; December silver gained 16 cents to $32.25; January platinum lost $3.30 to $1,612.20; and December palladium dropped 35 cents to $622.65 an ounce.

The markets are largely treading water until the Fed's new policy statement is released on Wednesday, following this week's FOMC meeting. The Fed is widely expected to discuss expanding QE3 in size and scope to include the purchase of Treasuries in addition to the mortgage-backed securities already sanctioned under QE3. This expanded approach, labeled QE3.5, could begin as early as December, when Operation Twist expires. Any language in the Fed's statement pointing toward QE3.5 is likely to boost risk assets and gold because of increased inflation risk.

Zero Hedge reports that China imported a whopping 512 tons of gold this year through August, an amount exceeding the entire gold reserves of the ECB, which holds a little over 501 tons. It's also more than the total purchases of all other central banks combined in 2011, which was a record-high 400 tons, according to World Gold Council data. At the same time, China has reduced its holdings of U.S. Treasuries by $125 billion in the past year, shifting some of its immense reserves into gold instead because of the dollar's increasingly shaky fundamentals. Other central banks are following suit. As Marketwatch said last week, "It is now more obvious than ever that gold is becoming the new global reserve currency. Continuous and aggressive central-bank actions from the United States and Europe are driving the demand for gold." This trend is likely to support higher gold prices in years to come.