Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.4% to close above $1,319 as the dollar receded on Japan's intention to reduce monetary easing, and reports that China may discontinue buying US Treasury bonds. The metal hit an intraday high above $1,328, nearly a four-month high, before pulling back on profit-taking.

Bloomberg reported that China, the biggest holder of US debt, may stop adding US Treasurys to its foreign reserves because of perceived weakness in the dollar and trade tensions with the US. At $3.1 trillion, China's currency reserves are the largest in the world. As the global recovery gathers steam and the central banks of Eurozone and Japan begin to tighten monetary policies, their government bonds become more attractive.

The dollar fell 0.3% on the news as Treasury prices fell. As if on cue, the yen jumped 1% against the dollar as the Bank of Japan said it plans to taper easing. A weaker dollar supports gold and other commodities by making them less expensive to holders of other currencies.

The buck was also pressured by data showing import prices rose by just 0.1% in December, the least in five months, amid falling prices for food and consumer items. Low inflation has been a stubborn impediment to the Fed's goal of to normalizing monetary policy.

Chicago Federal Reserve Bank President Charles today added his voice to the public debate among Fed members over the course of rate hikes. Like Neil Kashkari of the Minneapolis Fed and Raphael Bostic of Atlanta, both of whom spoke earlier this week, Evans wants to slow the pace of hikes until inflation rises toward the Fed's 2% target. Conversely, Loretta Mester of Cleveland and John Williams of San Francisco are calling for three or four hikes this year in order prevent rapid inflation spikes and unstable financial markets.

The other precious metals were mostly higher, with silver and platinum rising 0.2% and 0.7%, respectively, while palladium dropped 1.9%.

At the Comex close: February gold gained $5.60 to $1,319.30; March silver added 3 cents, to $17.04; April platinum rose $6.50 to $978.80; and March palladium lost $20.75 to $1,077.40 an ounce.