Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold traded mostly flat today, dipping 0.1% at the close before pulling even after hours, as traders await direction from tomorrow's meeting of the European Central Bank and Friday's U.S. non-farm payrolls report. After gaining 5.5% in the past month, largely on expectations of additional monetary easing from the Fed and ECB, gold remained below psychological resistance at $1,700 despite a marginally weaker dollar, which tends to boost the gold price. Silver slipped 0.3% while platinum and palladium gained 0.5% and 0.9%, respectively.

At the close: December gold dipped $2 to $1,694; December silver slipped 8 cents to $32.33; October platinum added $8.10 to $1,575.60; and December palladium picked up $5.50, to $646.95 an ounce.

ECB President Mario Draghi is expected to announce a new program of purchasing unlimited amounts short-term government debt in order to lower borrowing costs and stabilize the euro. Unlike typical quantitative easing, in which a central bank buys its own long-term debt by adding the cost to its balance sheet, effectively printing new money, Draghi's program will buy only short-term debt that it will "sterilize" by selling an offsetting amount from its balance sheet. On its surface, sterilization is less bullish for gold because it does less to increase the risk of long-term inflation. However, this program is likely to strengthen the euro at the expense of the dollar. A weaker dollar supports higher gold prices because gold is denominated in dollars, making it less expensive for holders of other currencies.

Bank of America told clients in an emailed report today that gold may hit $2,000 by year-end. The banking behemoth believes the Fed will announce another round of quantitative easing this fall, and negative real interest rates in the U.S. and Europe will strengthen demand for gold for the remainder of 2012.