Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.2%, closing back below $1,600, after a spate of positive economic reports spurred an impressive return of risk appetite, prompting traders to take some profits from this week's 2.7% rally in the gold price and pour them into equities. Pending home sales in January rose more than expected; orders for durable goods climbed by the most in a year; and a gauge of planned spending by businesses jumped to its highest level in more than twelve months. Combined with reassurances from Fed Chair Ben Bernanke that money will remain cheap and easy, and unexpectedly strong earnings reports from the eurozone , the upbeat data drove the Dow higher by 1.25% and the Global Dow by nearly 1%. Silver and platinum followed gold lower, dropping 1.1% and 1%, respectively, while palladium gained 0.5%.

At the Comex close: April gold fell $19.80 to $1,595.70; May silver dropped 34 cents to $28.99; April platinum slid $16.40 to $1,600.10; and June palladium gained $3.75 to $745.65 an ounce.

Bernanke continued his Congressional testimony today, telling the House Financial Services Committee pretty much exactly what he told the Senate yesterday: quantitative easing is helping the recovery; its risks are manageable; and it will continue for the foreseeable future. He added one new wrinkle, however. Once the Fed stops buying bonds, whenever that happens, it is unlikely to start selling them right away. Rather, as part of its exit strategy, the Fed may hold the bonds on its balance sheet, which currently exceeds $3.1 trillion, and allow them to expire gradually. This change would effectively lengthen the duration of quantitative easing beyond the end of asset purchases, strengthen monetary easing, and keep real interest rates low�all of which would be beneficial for gold.