Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.5% on technical selling as it broke support and triggered automatic stop-loss sales following a huge liquidation in the Asian market. It was the second time in a week that gold has tumbled on a massive sale by a fund-type trader, with last week's occurring in the opening moments of Comex, the Chicago-based commodities exchange. According to Sharps Pixley CEO Ross Norman, one very large Asian seller probably sought to short the market by causing algorithmic selling as support levels were broken. In addition, anxiety over the U.S. budget talks and their consequences for the global recovery has traders poised to dart into cash. Gold's close just above $1,695 was its lowest in a month. Other precious metals fell in sympathy, with silver losing 2.8%, platinum 1.9%, and palladium 1.2%.

At the Comex close: February gold fell $25.30 to $1,695.80; March silver dropped 95 cents to $32.81; January platinum shed $30.90 to $1,582.90; March palladium lost $8.55, to $682.70 an ounce.

While a sell-off like today's indicates some current weakness in the gold market, longer-term fundamentals remain solid. Negative real interest rates in the U.S. make gold more attractive than most interest-bearing assets. Years of loose monetary policies have increased the risk of long-term inflation. And additional monetary easing is expected in the eurozone, Japan, China, and the U.S., which will further undermine the value of paper currencies. China is buying record amounts of gold; central banks are adding to reserve holdings on almost every dip; and demand in India is beginning to build again. Despite recent speculative turbulence, gold remains very strong as a long-term holding.