Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold plunged 9.3% to its lowest close since February 2011 as Friday's declines continued in the midst of a general market sell-off. The Dow lost more than 260 points, the S&P 500 fell 2.3%, oil tumbled 3.3%, and commodities shed 2.5% as sub-par economic data in the U.S. and China drove investors into cash. In new signs of a stumbling U.S. economy, manufacturing in the New York Fed region dropped more than expected in April and homebuilder's grew more pessimistic for the third straight month. China's rebound also slowed, with GDP expansion falling below 8% for the first back-to back quarters in twenty years. Precious metals took the brunt of today's liquidations, with gold seeing its biggest one-day percentage drop since 1983. Silver tumbled 11% to its lowest close since early 2011. Platinum and palladium fared little better, dropping 4.8% and 5.9%, respectively.

At the Comex close: June gold plunged $140.30 to $1,361.10; May silver tumbled $2.97, to $23.36; July platinum dropped $71.10 to $1,424.80; and June palladium fell $42.10 to $667 an ounce

As on Friday, panicked institutional selling in paper gold markets drove prices through a series of lower support levels, triggering automatic stop-losses and long liquidations. During what is a traditionally weak time of year anyway, sentiment had turned sharply negative last week after Goldman Sachs cut its price forecasts and ECB President Mario Draghi pressured Cyprus to sell its excess gold reserves to help fund its bank bailout. Today's sell-off extended Friday's blow-off, which is not unusual when hedge funds suddenly reverse direction and speculative excess leaves the market.

Nonetheless, gold's fundamentals going forward look solid. Currency wars and quantitative easing will continue to devalue money at home and abroad, adding to the risk of long-term inflation. The ever-morphing eurozone debt problems still threaten to break up the euro. And geopolitical conflict�in the Koreas, the Middle East, and elsewhere�is undermining stability at a time when the global economy is struggling for its footing. This bull market is far from over, in our opinion. Gold, especially physical gold, remains compelling insurance despite the dramatic correction of the last two sessions.