Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.4%, rising to nearly a one-month high, on safe-haven inflows after the EU threatened to banish Cyprus from the eurozone if it doesn�t agree to onerous bailout terms. The Cypriot parliament rejected the EU�s aid plan on Tuesday because it requires a tax of up to 10% on bank deposits of regular citizens, violating the guarantees of deposit insurance. Led by Germany, the ECB has now given Cyprus an ultimatum to accept a plan by Monday or lose its liquidity lifeline, thereby risking default and expulsion from the eurozone. Worried that bank deposits may no be longer inviolable throughout the region, investors are shifting capital into gold, silver, and other assets held outside of banking systems. U.S. and global equities rolled back while gold rose for the fourth time in five sessions, reaching an intraday high above $1,616. Silver jumped 1.4% to a one-month high while platinum and palladium, more closely tied to industry, both slipped by 0.2%

At the Comex close: April gold gained $6.30 to $1,613.80 $1,616.50; May silver jumped 40 cents to $29; April platinum dipped $2.40 to $1,580.10; and June palladium slipped $1.35 to $756.85 an ounce.

Gold was further supported, and the dollar undermined, by the FOMC�s announcement yesterday that monetary stimulus will continue unabated for the foreseeable future, despite what it sees as �modest growth� in the economy. The Fed will proceed with quantitative easing, its program of bond-buying that adds $85 billion per month to a balance sheet already approaching $3 trillion. In addition, interest rates will be held near zero as long as inflation remains below 2.5% and unemployment stays above 6.5%, probably until in mid-2015. Japan is preparing an aggressive increase in its own program of quantitative easing. And the ECB, facing five straight quarters of economic contraction in the eurozone and a pending default in Cyprus, may soon be forced to do the same. These policies are bullish for gold because they devalue paper currencies and boost the risk of long-term inflation.