Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.6%, recovering all of Friday's losses, as traders prepare for what should be a bullish week. The FOMC meeting on Tuesday and Wednesday is widely expected to result in a dovish stance showing little inclination to reduce quantitative easing, the Fed's $85 billion-per-month program of buying bonds. Worries about the premature withdrawal of stimulus have driven gold lower and mortgage rates higher in recent months. The higher rates caused a pullback in home sales in June, potentially undermining a primary driver in the recovery. To reassure the markets and hold down rates, Fed Chair Ben Bernanke said early this month that it is "far too early" to consider tapering stimulus, given slow GDP growth and persistent weakness in hiring.

The July non-farms payroll report due on Friday is forecast to show around 175,000 new jobs added, an amount that is unlikely to change the pace of easing. Furthermore, the government is expected to report on Wednesday that the economy grew a measly 1% in Q2, down from just 1.8% in Q1 and far too little to justify reductions in QE. Hedge funds and other large money managers increased bullish bets on gold by 26% in anticipation that the Fed will keep the liquidity spigots open. QE supports higher gold prices by devaluing the dollar and increasing risk of long-term inflation. The other metals also gained, with silver adding 0.5% while platinum and palladium jumped 1.4% and 2.9%, respectively.

At the Comex close: December gold gained $7.70 to $1,329.60; September silver added 9 cents, to $19.86; October platinum jumped $19.90 to $1,442.70; and September palladium surged $20.65 to $744.65 an ounce.