Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.5% to close at a one-month high as mixed U.S. economic data supported both safe-haven and commodity demand for precious metals. Manufacturing in the Philadelphia Fed and New York Fed regions fell into negative territory this month, faring far worse than expected and further diminishing the likelihood that quantitative easing will end any time soon. QE boosts demand for gold because it devalues the dollar and increases long-term inflation risk.

At the same time, U.S. housing starts jumped in December at the highest rate in four years, adding to optimism that the recovery in this crucial sector is gaining momentum. And new jobless claims fell to a five-year low last week, although the improvement was possibly a seasonal quirk. Still, the S&P 500 rose to a five-year high on the upbeat data, spurring demand for commodities and supporting precious metals. Gold climbed back above its 200-day moving average, a bullish signal, and platinum picked up 0.4% to close above $1,700 for the first time since early October. Silver added 0.9% while palladium finished virtually unchanged.

At the Comex close: February gold gained $7.60 to $1,690.80; March silver rose 27 cents to $31.81; April platinum picked up $6.40 to $1,700.50; and March palladium dipped 30 cents to $726.15 an ounce.

Iamgold Corp., a major global gold producer, predicts gold will reach $2,500 in coming years. According to CEO Steve Letwin, gold mining is becoming increasingly expensive and more difficult as the best-quality reserves are tapped out. As a result, annual production will decrease and the price of gold will rise substantially to reflect diminishing availability and higher production costs. Global mining production declined last year while the average grade of ore discovered has dropped by 51% in the past ten years, according to data compiled by Bloomberg.