Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.7% and the dollar weakened as traders geared up for the possibility of another round of quantitative easing from the Fed following last week's poor jobs report. The dollar was also pressured after ECB chief Mario Draghi told a European Parliament committee that progress is being made on reforms including shared fiscal and financial sovereignty, that will help to alleviate the eurozone debt crisis. A falling dollar supports higher gold because gold is denominated in dollars internationally, making it less expensive in other currencies when the dollar drops. Rising demand in China added support to the gold price, as the government of Hong Kong reported that gold imports to the mainland increased to 75.6 metric tons in May, a sixfold rise from a year ago. Silver gained 2% and palladium added 0.6% while platinum slipped 0.3%

At the close: August gold gained $10.20 to $1,589.10; September silver rose 52 cents, to $27.44; October platinum dropped $3.60 to $1,445.90; and September palladium added $3.55 to $583.90 an ounce.

Coming after a recent spate of poor manufacturing, retailing, and consumer confidence data, last Friday's non-farms payroll report confirmed that the moribund U.S. economy is in serious need of help. Analysts and traders are already looking toward another round of quantitative easing, which would depress the dollar and boost gold. In a Bloomberg report today, Goldman Sachs chief economist Jan Hatzius declared that "the Fed is likely to ease further"; and Kim Youngsung, head of fixed income at Samsung Asset Management in Seoul, said "Friday�s data will bring QE3.� Treasury yields fell near a record low on speculation that the government will soon announce more bond purchases.

Adding fuel to the QE fire, San Francisco Fed chief John Williams today warned that the economy now faces "a sobering set of circumstances" requiring "extraordinary vigilance." Speaking before bankers in Idaho, he all but called for QE3, saying "we stand ready to do what's necessary" and "it is essential we provide sufficient monetary accommodation to keep our economy moving towards our employment and price stability mandates.� He specifically mentioned "additional purchases of longer-maturity securities, including agency mortgage-backed securities" as the most effective tools. No doubt, more Fed members will weigh in over the next few weeks. Gold gained by more than 85% during QE1 and QE2, and would likely be propelled to new highs over $1,900 an ounce by QE3.