Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rallied 1.5% to closed at a two-week high on speculation that central bankers will soon announce more monetary easing to spur economic growth. Stock markets in Asia, Europe, and the U.S. all climbed while the dollar and Treasury prices retreated. Oil surged nearly 5%, boosted also by concerns that Iran may attempt to close the Strait of Hormuz to nations applying the new EU sanctions that went into effect yesterday. The other precious metals also rallied, with silver gaining 2.8%, platinum 2.3%, and palladium 3.6%.

At the close: August gold rallied $24.10 to $1,621.80; September silver gained 78 cents, to $28.28; October platinum rose $33.10 to $1,491.40; and September palladium added $20.90 to $598.90 an ounce.

With global growth grinding to a standstill, central banks around the world are getting ready to reopen the liquidity floodgates. As we reported yesterday, the ECB is expected to cut its benchmark rate by a quarter-point on Thursday, perhaps more, and follow up with more aggressive measures like buying sovereign debt and funding another long-term refinancing operation (LTRO). The Bank of England will expand its debt-purchasing program by 75 billion pounds, according to Credit Suisse. And China is expected to ease its monetary policy, cutting its reserve-ratio again this month and unveiling other policies to boost the market.

More Fed action may not be far behind. After yesterday's poor U.S. manufacturing report, pressure is rising on the U.S. central bank to take stronger steps to protect the sputtering recovery. The IMF lowered its growth projection to 2% for the U.S., and IMF managing director Christine Lagarde said explicitly that further easing by the Fed may be required. As today's market action signaled, monetary easing drives up asset prices and demand for gold as a hedge against long-term inflation risk.