Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold finished nearly flat, dropping less than 01%, as anxiety over the looming U.S. "fiscal cliff" combined with deepening eurozone weakness to drive a major sell-off of risk assets. Early in the session, gold gained more than 1% on speculation that Obama's re-election will mean a continuation of the loose monetary policies that have helped to double the gold price since he took office. But the rally faded as investors turned their attention to the coming "fiscal cliff," a $600 billion combination of spending cuts and tax increases that will be triggered, to the detriment of the economic recovery, if budget negotiations fail before the end of the year. The dollar rallied to a two-month high, pressuring gold's gains, while the Dow plummeted by 2.4% and the S&P 500 fell below 1,400 for the first time in two months. Oil fell by more than 4.5% and other commodities also tumbled. Gold was hit by heavy liquidations as traders were forced to cover equity margins. That it finished nearly flat is testimony to its strong demand as a currency of last resort, which should drive prices higher as U.S. debt worries intensify. Silver and platinum both fell 1.2% while palladium lost 1.6%

At the Comex close: December gold fell $1 to $1,714; December silver fell 37 cents to $31.66; January platinum lost $18.80 to $1,539.50; and December palladium dropped $9.80 to $610.35 an ounce.

More grim news from Europe helped to drive the dollar higher and reverse gold's early gains. The EU cut its growth forecast for 2013 to 0.1%, down from 1%, conceding that the eurozone is not improving. Germany and France, the two largest economies, will grow by merely 0.8% and 0.4%, respectively. Spain's GDP is expected to contract by 1.4%, making it less likely to meet the fiscal requirements for aid from the EU. And Greece's debt is projected to reach 188% of GDP next year, moving it further down path to insolvency. The Greek parliament will soon vote on a new round of deep austerity measures required for its latest round of aid from creditors. Failure to pass means Greece could run out of money this month.