Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rose nearly 1% to a two-week high as prospects for additional monetary easing in Europe spurred safe-haven demand. Following yesterday's reports of tumbling factory output in France, Britain's industrial production dropped far more than expected, raising speculation that the Bank of England will increase its program of quantitative easing to prevent the U.K. falling into its third recession in five years. The ECB's Jens Weidmann, who heads Germany's Bundesbank, told Bloomberg TV that easing in teh eurozone will continue "for as long as necessary" to revive the flagging eurozone economy, and that further devaluations in the euro won�t threaten the stability.

Gold briefly touched $1,600 before slipping back for its fourth straight winning session, the most since August. Monetary easing increases the risk of long-term inflation and stimulates demand for gold as a store of value. Silver followed gold higher, gaining 1.1%. Platinum and palladium, more directly tied to industry, slipped 0.4% and 0.5%, respectively.

At the Comex close: April gold gained $13.70 to $1,591.70; May silver rose 32 cents to $29.17; April platinum slipped $6.20 to $1,595; and June palladium dropped $3.70 to $775.50 an ounce.

Gold's winning streak has gained momentum from technical trading as rising prices are triggering substantial short-covering rallies. Following the recent price drop, traders increased their short positions by around 60%, according to Marketwatch, borrowing gold in hopes of selling it back at lower prices. Rising demand in Asia and Europe, however, is lifting prices and causing traders to scramble to cover their shorts, driving prices even higher. This process should help gold prices to recover more quickly, as it did after the contraction at the beginning of 2012.

Rising demand in Asia is driven by expectations that the Bank of Japan, too, will deepen its aggressive program of quantitative easing. The nominee for BOJ Deputy Governor, Hiroshi Nakaso, said today that there's room to ease further, echoing Haruhiko Kuroda, the nominee for Governor. Gold recently rose to all-time record high in yen behind the BOJ's systematic devaluation of the yen.