Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold plunged 3.4% from yesterday's close, settling at a three-year low of $1,193, as the Fed's decision to taper in January triggered a surge in the dollar and trimmed demand for the metal as an alternative store of value. After closing regular trade yesterday with a 0.4% gain, gold fell 1% in electronic trade immediately following the FOMC's statement that asset purchases will be reduced from $85 billion to $75 billion per month. Today's session accelerated those losses with gold falling another 2.4% for its biggest single-day drop since last June.

Further pressuring the precious metals complex, the dollar gained broadly in response to the January taper announcement. Tantamount to printing money, QE has devalued the dollar by flooding the economy with liquidity, so any curtailment of easing is seen as bullish for the dollar. Because gold and other commodities are denominated in dollars for international trade, a stronger dollar makes them more expensive for holders of other currencies, diminishing demand. Silver was hit even harder than gold, falling 4.4%, while platinum and palladium lost 1.5% and 0.5%, respectively.

At the Comex close: February delivery gold plunged $41.40 to $1,193.60; March silver tumbled 87 cents to $19.19; January platinum fell $24.30 to $1,318.40 March palladium lost $3.15 to $696.30 an ounce.