Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.2% on technical selling after two sessions of rising prices. Following this week's rally to a two-week high above $1,680, driven by an unexpected contraction in the U.S. economy and the Fed's statement of continued support for monetary easing, gold was unable to push through major resistance at $1,700. Traders took profits at the top of the range, causing gold to retrace its gains from yesterday.

A government report showing inflation at just 1.4% in 2012, substantially below the Fed's target of 2.5%, also weighted on the metal by reducing demand for hedges against inflation. Traders now await tomorrow's non-farms payrolls report for new signals on whether the Fed is more likely to throttle back or press ahead with monetary easing in coming months. The other precious metals followed gold lower, with silver dropping 2.6% while platinum and palladium both lost 0.8%. For the month, gold slipped 0.8% while silver rose 3.7%. Sister metals platinum and palladium gained 8.6% and 6% in January, respectively, behind supply constrictions and improvements in the global market for automobiles.

At the Comex close: April gold fell $19.60 to $1,662; March silver lost 83 cents to $31.35; April platinum dropped $13.90 to $1,675.40; and March palladium surrendered $5.70 to $745.70 an ounce.

A study by the World Gold Council released today found that holding gold is a superior way to protect against foreign-exchange risk in a diversified portfolio, especially in relation to emerging market assets. Because gold has a positive correlation to emerging market growth and a negative correlation to the US dollar and other developed-market currencies, it provides an effective and low cost alternative to traditional foreign exchange hedges when investing in emerging markets. In addition, according to WGC findings, gold provides a proven hedge against tail-risk, or the negative impact of rare events on a portfolio. Over eight periods of crisis conditions examined in the report, the inclusion of gold in an emerging-market portfolio provided additional gains of 2.4% over an un-hedged portfolio and over 1% above a currency-hedged portfolio.