Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rose 0.3% to a two-week high as slowing U.S. economic growth and new eurozone debt worries increased safe-haven demand. GDP rose merely 2.2% in the first quarter, falling from 3% in the previous quarter and casting some doubt on the strength of the recovery. After Fed Chair Ben Bernanke said on Wednesday that he won�t hesitate to provide more stimulus if needed, investors saw the weak GDP report as adding to the likelihood of additional monetary easing, which would further weigh on the dollar and buoy the gold price. S&P's decision to downgrade Spain�s credit rating by two steps to BBB+ from A, with a negative outlook, also supported gold's gains. Yields on Spanish and Italian bonds immediately rose. The other precious metals followed gold higher, with silver gaining 0.5%, platinum 0.4%, and palladium 1.3%. For the week, gold gained 1.4% and palladium 0.7%, while silver lost 1% and platinum 0.5%.

At the close: June gold added $4.30 to $1,664.80; July silver gained 14 cents to $31.35; July platinum gained $5.50 to $1,575.70' and June palladium for rose $8.85 to $681.50 an ounce.

After a few sleepy weeks, the gold market seems to be perking up. Following Bernanke's declaration that the Fed will to do whatever it takes to keep the economy rolling, options traders increased their bets on much higher gold prices by summer. According to Bloomberg, the most widely held option contract on Comex is for gold at $2,200 by July, more than 30% higher than current the current price. And as we reported earlier, central banks added strongly to their gold reserves last month. Mexico added 16.8 metric tons, worth around $906 million. Russia bought 16.5 and Turkey 11.5 tons, with a number of smaller emerging-market nations adding lesser amounts. All are taking advantage of the current dip in the gold price to diversifying their reserves away from dollars and euros. According to the World Gold Council, central bankers bought some 440 tons last year, the most in 50 years, and are expected to buy even more this year. This ongoing central bank demand should provide solid support for gold.