Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rallied 1.8% to close above $1,421, and then added another $4 after hours, as institutional traders re-entered the gold market following last week's stampede to the exits. Hedge funds and other large speculators increased their bullish bets by nearly 10% and sharply reduced their short positions, according to CFTC data, shifting last week's bearish momentum in the paper gold markets. Gold futures have now rebounded by nearly 5% after falling to $1,361 one week ago, the lowest close since February 2011. Today's gains were helped by a declining dollar and rising global demand for commodities. Silver jumped 1.6% while platinum and palladium rose 0.9% and 0.7%, respectively.

At the Comex close: June gold rallied by $25.60 to $1,421.20; May silver gained 36 cents to $23.32; July platinum added $12.90, to $1,436.80; and June palladium picked up $4.85, to $681.90 an ounce.

Despite last week's major sell-off in paper gold, which saw ETF holdings drop to a three-year low, demand for physical gold remains remarkably strong as long-term investors take advantage of lower prices to add to their positions. April is typically a slow month for bullion. Nonetheless, the U.S. Mint has already sold nearly 215,000 Gold Eagle and Gold Buffalo one-ounce coins this month�more than three times the total for all of March and more than ten times the total for April 2012.

Demand for physical gold has been similarly strong in Asia. Bloomberg reported that gold traders and banks in India have been running out of bullion because of a huge increase in purchases of gold coins and jewelry. Indian gold imports are expected to jump by 36% in the Q2 compared to last year. And the China Gold Association said retail sales surged last week, depleting dealer inventory and driving up premiums for gold bars. Now speculators in paper gold appear to be rejoining the party, too, and that's bullish for the gold price.