Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold jumped 2.6%, its largest one-day gain in nine weeks, as mixed U.S. economic data and a weaker dollar brought more bargain-hunters into the market. Manufacturing picked up slightly as the ISM index climbed to 50.9 in June, barely out of contraction. But the employment component of the index fell to 48.7, signaling widespread weakness and setting the stage for another sub-par non-farms payroll report, due on Friday. The metal has now rebounded by 4.1% in two days following last week's sell-off. The other precious metals followed suit. Silver picked up 0.6% while platinum and palladium surged 3.2% and 3.9%, respectively.

At the Comex close: August jumped $32 to $1,255.70; September silver added 11 cents, to $19.58; October platinum gained $42.60 to $1,382.50; and September palladium surged $26 to $686.70 an ounce.

The tepid ISM jobs numbers helped to weaken the dollar and support higher gold prices by reducing pressure on the Fed to taper quantitative easing, its program of buying $85 billion in long-term bonds each month to stimulate growth and employment. QE is bullish for gold because it devalues the dollar and increases the risk of long-term inflation. Stronger than expected manufacturing reports from the eurozone also weighed on the dollar by strengthening the euro. Because gold is denominated in dollars internationally, it becomes less expensive to holders of other currencies when the dollar weakens, bidding up with overseas demand.

Physical demand in Asia continues to be strong as investors look for safe havens in light of lower gold prices and China's deepening slowdown. Last month's official report showed manufacturing at a four-month low of 50.1 in China, while private data from HSBC and Markit reported contraction at 48.2, the worst reading since last September.