Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.3% to close above $1,730 on safe-haven demand as tensions flared in the Middle East and global stock markets tumbled. Israel bombed the Gaza Strip, killing a senior leader of the Hamas army, and threatened the use of ground forces in retaliation for a series of missile attacks earlier this week. Oil prices rose on fears that the escalating violence could interrupt supplies. The Dow fell by nearly 1.5% and the S&P 500 neared its lowest close since July. The other precious metals also gained, with silver adding 1.2%, platinum 0.3%, and palladium 0.8%.

At the Comex close: December gold gained $5.30 to $1,730.10; December silver rallied 39 to $32.88; January platinum added $5.20 to $1.591.60; and December palladium picked up $4.95 to $641.55 an ounce.

Higher gold prices were also supported by the minutes from the last FOMC meeting, released today, which indicated that QE3 may be expanded before the end of the year. A growing number of Fed officials support the outright purchase of more bonds when Operation Twist, the program of trading short-term for long-term Treasury debt, expires in December. Sometimes called QE3.5, the new purchases would likely total around $40 billion per month of long-term Treasuries in addition to the monthly $40 billion in mortgage-backed securities under QE3.

Furthermore, Janet Yellen of the San Francisco Fed said yesterday that she is "strongly supportive" of establishing unemployment targets that could push near-zero interest rates until early 2016. Yellen is widely considered the frontrunner to succeed Ben Bernanke as Fed Chair in 2014. The extensions of easing policy indicated in today's Fed minutes and Yellen's comments would be bullish for gold and bearish for the dollar, which fell on the news today.

Deutsche Bank's global head of metals trading, Raymond Key, said gold prices will surpass $2,000 an ounce next year as governments ramp up stimulus around the world. Slow economic recoveries in Japan, China, and the U.S., and the deepening eurozone debt crisis, will force central banks to continue printing money, he said at the annual meeting of the London Bullion Market Association in Hong Kong, which will undermine paper currencies and increase the risk of inflation.