Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold inched higher for its fourth straight winning session as investors readied for the possible announcement of new policy interventions at the FOMC meeting this week. A litany of softer economic data since its last meeting in June has increased the likelihood that the Fed will do something. Most analysts believe another round of quantitative easing (QE3) is possible, although an extension of near-zero interest rates until late 2015 is more likely this time around. Either action would support a rising gold price by devaluing the dollar and increasing long-term inflation risk, stimulating demand for gold as a safe-haven store of value. Gold's rise today came despite a falling euro and rising dollar, which tends to weigh on gold prices. The dollar gained in response to growing doubts that eurozone ministers will follow through on last week's promises by ECB president Mario Drahgi and others to save the euro. Silver and palladium outpaced gold by gaining 1.9% and 1.6%, respectively, while platinum finished virtually flat.

At the close: August gold added 70 cents to $1,618.70; September silver jumped 52 cents to $28.02; October platinum slipped 60 cents to $1,407.60; and September palladium gained $8.85 to $580.70 an ounce.

Veteran Marketwatch financial columnist Peter Brimelow reported today that longtime gold market analysts are expecting a major rally in August. He cites, among others, Standard Bank as noting a huge short position in the Comex futures market. Since 2004, when gold-backed ETFs were introduced, only five short positions of similar magnitude have been established, and three of them immediately preceded massive short-covering rallies of between 23% and 36%. The only exceptions occurred in 2008 after the Lehman Brothers crash.