Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.6% to close just under $1,186 as soft U.S. industrial data and deepening concern about a possible Greek default boosted safe-haven demand.

U.S. industrial output contracted unexpectedly in May, according to Fed data. The manufacturing sector has now fallen for six straight months, putting it into a technical recession . Separately, the New York Fed reported general business conditions dropped into negative territory for the second time in three months, contracting to the lowest level in almost 18 months.

Ongoing global economic weakness and the strong dollar are creating headwinds for U.S. factory goods, restraining economic growth and vexing the Federal Reserve as it calculate when to begin raising interest rates. The FOMC meets this week to discuss their next step in monetary policy.

The dollar fell on the downbeat data as traders hedged their bets about the timing of the first rate hike. A weaker dollar typically supports gold and other commodities denominated in it for international trade by making them less expensive to holder of other currencies.

Gold was also supported by the deepening impasse between Greece and its creditors. The IMF walked out of negations late last week and both sides hardened their positions over the weekend, with EU and IMF officials demanding new concessions while Greece steadfastly refuses to impose the austerity measures required to qualify for additional bailout funds.

As the possibility looms larger of a Greek default and exit from the Eurozone, contagion is beginning to affect European financial markets, forcing premiums on safe-haven German bunds to 2015 highs over Spanish, Italian and Portuguese government bonds. European stocks tumbled, pulling U.S. and global indexes lower in their wake.

The other precious metals were mixed, with silver jumping 1.6% while platinum and palladium dropped 0.8% and 0.4%, respectively.

At the Comex close: August gold gained $6.60 to $1,185.80; July silver jumped 26 cents to $16.08; July platinum lost $8.20 to $1,088.60; and September palladium dropped $4 to $734.15 an ounce.