Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell by 2%, dropping under $1,400 to its lowest close in nearly a month, as U.S. equities and the dollar extended their rallies, reducing safe-haven interest in the metal. The Dow and the S&P 500 hit new all-time highs as trading momentum has firmly shifted in the direction of risk. These gains came despite data showing that U.S. factory output declined by the most in eight months, manufacturing in the New York Fed region fell, and wholesale prices fell by the most in three years�all signs of a very sluggish economy.

The dollar climbed to a nine-month high against a basket of major currencies, less because of its own solid fundamentals than because of excessive weakness elsewhere. Central bankers from Europe to China, Japan to Australia have devalued their currencies to stimulate economic growth. The eurozone's recession has extended to a sixth straight quarters after France's GDP contracted by 0.2% and Germany's rose at a paltry 0.1% during Q1.

The U.S. looks relatively strong by comparison, and in order to buy U.S. stocks or Treasuries, foreign investors must first buy dollars, which bids them up. A rising dollar pressures the prices of precious metals and other commodities because they are denominated in dollars internationally and become more expensive to holders of other currencies. The other metals were mixed, with silver falling 3.1% and platinum dropping 0.8% while palladium rose 0.3% because of a South African miner's strike.

At the Comex close: June gold fell $28.30 to $1,396.20; July silver lost 72 cents to $22.66; July platinum dropped $11.20 to $1,490.70; and June palladium added $1.90, to $729.05 an ounce.