Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.3% after a spate of positive U.S. economic data stimulated appetite for commodities and risk assets. Factory output rose by 0.6% in July, following June's increase of 0.1%, signaling that that the economy is expanding. In addition, home-builder confidence rose to a five-year high on expectations that the crucial housing market will continue its recovery. And consumer prices remained virtually flat last month, as the CPI rose by just 1.4% for the year through July, its lowest yearly increase since late 2010. Stocks and oil rose on market optimism and gold caught an uplift from rising sentiment for commodities. The dollar also rose, putting pressure on gold's gains. Silver followed gold's lead by gaining 0.2%, while platinum and palladium slipped 0.2% and 0.1%, respectively.

At the close: December gold gained $4.20 to $1,606.60. September silver added 5 cents to $27.81; October platinum slipped $2.90 to $1,396.20; and September palladium dipped 35 cents to $578.05 an ounce.

Not all of today's economic news was positive. The New York Fed's manufacturing index fell to negative 5.9 in August, well below the 7.4 reading in July, for its first negative reading since October 2011. Empire State data are closely monitored as a measure of health in the U.S. manufacturing sector. Nonetheless, the recent positive news, including yesterday's rise in retail sales, is leading some forecasters to believe the Fed is now less likely to change its monetary policies in September. As Marketwatch reports, Jan Hatzius of Gold Sachs and Michael Hanson of Bank of America both told clients that the odds of another round of quantitative easing, or QE3, have now diminished. Julia Coronado of BNP Paribas, however, still expects QE3 in September because the markets have rallied since the Fed hinted at more easing in early August.

It's a testimony to gold's dynamic range of drivers that it gained today even as the dollar rose and the likelihood of more easing next month perhaps lessened. We've said before that gold sometimes trades as a commodity, tracking higher with risk assets, and at other times as a safe-haven currency, gaining when investors become risk-averse. Today we saw its commodity role in action, one that is likely to become more prevalent if the economy picks up additional momentum, with or without QE3.