Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold closed 0.6% lower in volatile trade, and then lost another 0.3% after hours, following mixed signals from Ben Bernanke over the future of quantitative easing, the Fed's program of buying $85 billion in long-term securities each month to stimulate grow and employment.. In prepared remarks before Congress, the Fed Chair warned against the "premature tightening of monetary policy," saying it would cause interest rates to rise and put the economic recovery at risk. Traders took this statement to imply that QE was secure at current levels. Gold, Treasuries, and equities immediately rallied, with gold spiking to $36 an intraday high of $1,413, while the dollar tumbled. Tantamount to printing money, QE supports higher gold prices because it devalues the dollar and increases the risk of long-term inflation.

During follow-up questions, however, Bernanke threw the future of QE back into doubt, saying that the Fed could begin stepping down QE in the next few months if the labor market improves sufficiently. While hardly a death knell for monetary easing, it was enough to panic traders and reverse the markets almost immediately. The dollar rallied while equities and Treasuries pulled back and gold tumbled more than $46 to end the session with a $10 loss. In electronic trade, prices slid another $6 after hours when the minutes from the last FOMC meeting revealed a growing number of officials in favor of reducing monetary stimulus. The other precious metals rose on the session, with silver gaining 0.1%, platinum 0.7%, and palladium 0.5%.

At the Comex close: June gold lost $10.20 to $1,370.10; July silver added 2 cents, to $22.47; July platinum gained $10.80 to $1,469.20; and June palladium picked up $4.05, to $752.15 an ounce.