Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 0.7% as the dollar jumped following a rate-cut by the ECB and better-than-expected U.S. GDP data. In a surprise move, the European Central Bank dropped its benchmark interest rate to a record low 0.25%, suggesting that further cuts may follow in order to head off a deflationary spiral. With inflation running at just 0.7% and unemployment at 12.2%, ECB head Mario Draghi pledged that monetary policy "will remain accommodative for as long as necessary" to get the eurozone recovery on track. The dollar jumped against the euro after the ECB rate cut, weighing on gold and other commodities that are denominated in dollars for international trade.

Gold was further pressured, and the dollar supported, after Commerce Department reported that the U.S. economy grew by 2.8% in the third quarter, more than forecast. Beneath the headline number, however, GDP data did not look very strong. Unsold inventories rose, corporate investment fell, and consumer spending grew at its slowest pace in more than two years, leading economist to expect much slower growth in the fourth quarter.

Still, traders took GDP growth to mean the Fed may begin to withdraw monetary stimulus sooner previously thought, perhaps as early as next month, driving equity markets, commodities, and precious metals lower. The Dow and Global Dow lost 1%; oil and the S&P/Goldman Sachs commodities index both shed 0.6%. Silver dropped 0.5% while platinum and palladium each gave up 0.7%.

At the Comex close: December gold fell $9.30 to $1,308.50; December silver dropped 11 cents to $21.66; January platinum lost $10.60 to $1,456.80; and December palladium gave up $5.20 to $759.15 an ounce.