Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold climbed 0.4%, closing just under $1,195, and then jumped to $1,204 in electronic trade as soft economic reports in Japan, China, and the Eurozone fueled expectations of deeper global easing, boosting demand for the metal as an alternative store of value.

Japan's economy contracted by 1.9% in the third quarter, more than forecast, on falling business investment and manufacturing. China's imports shrank and exports decreased unexpectedly in November, leading to projections of slower future growth. And the Organization for Economic Cooperation and Development reported today that the Eurozone is on the brink of falling back into contraction.

Central bankers are expected to respond with deeper monetary stimulus to boost economic activity and consumption. The Bank of Japan is already committed to unprecedented monetary easing to lift its economy out of long-term stagnation. The ECB has started purchasing asset-backed securities and private bonds, and is poised to begin Fed-style quantitative easing by buying government debt. Tantamount to printing money, these programs increase the risk of long-term inflation by flooding markets with liquidity, spurring demand for gold as a hedge against currency devaluation.

Hedge funds and large-scale money managers are becoming increasingly bullish on gold in light of deeper global easing. Net-long positions and options, which are essentially bets on higher gold prices, rose by 20% last week, the most since August. It was the third consecutive week of rising bullish positions, the longest stretch since July.

The other metals were mixed. Silver closed up 0.1% before spiking another 0.8% after hours. Platinum gained 0.8% and then added another 0.4%, while palladium slid 0.6% before recouping most of that loss in electronic trade.

At the Comex close: February gold climbed $4.50 to $1,194.90; March silver added 2 cents, to $16.27; January platinum gained $9.90 to $1,229.40; and March palladium slid $4.90 to $797.80 an ounce.