Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold edged up, marking its the fifth straight winning session and longest rally since October, as new worries about the U.S. economy and eurozone debt crisis increased safe-haven demand. The U.S. current-account deficit grew to its widest since 2008, signaling a dramatic slowdown in exports. Jobless claims rose unexpectedly for the fifth time in six weeks, indicating stagnant job growth. And consumer inflation fell sharply, renewing mild concerns about deflation. Combined with yesterday's falling retails sales report, today's data raised more speculation that the Fed will intervene to stimulate the economy. The Dow rose 150 points on easing hopes. Silver dropped 1.9% while platinum and palladium added 1.4% and 1.9%, respectively.

At the close: August gold added 20 cents to $1,619.60; July silver fell 53 cents to $28.41; July platinum rose $20.80 to $1,487.60; and September palladium gained $11.60 to $634.90 an ounce.

Debt contagion is seeping from the periphery to the core of the eurozone. Italy's borrowing costs soared yesterday, making it more likely that the zone's third-largest nation will follow Spain in needing a bailout; and Egan-Jones downgraded France's debt-rating to BBB+. Elections this weekend in Greece and France could further destabilize the region's economies. Greece's far-left Syriza party has vowed to abrogate the terms of Greece's bailout, which could quickly result in default and ejection from the monetary union, possibly undermining the union itself. France's socialist party could gain control of the legislature, giving newly-elected President Hollande more clout to resist Germany's lender-friendly austerity mandate for bailouts. In an extraordinary step, central banks from the G20 nations are preparing for coordinated action to provide liquidity in case the credit markets panic, according to Reuters, as they did after the Lehman Brothers collapse in 2008.

In a new survey of managers of central banks, sovereign wealth funds, and multilateral institutions with more than $8,000 billion in assets, Swiss banking giant UBS found that nearly 75% expect at least one nation to exit the euro within the next five years. Greece's election this weekend is seen as a "pivotal moment" in the future of currency, with a break-up of the eurozone seen as the biggest risk to the global economy over the next 12 months. These reserve managers are influential because their asset allocation decisions have a huge impact on foreign exchange markets. They expect gold and emerging market debt to be the best-performing assets over the next six months, according to the UBS survey.