Daily Gold Update

Source: American Gold Exchange

Austin— Gold and silver declined slightly today as lower consumer sentiment and higher inflation cut into risk appetite, forcing equities to trade sideways for most of the day. Consumer prices rose in February at their fastest rate in ten months and consumer sentiment declined for the first time since August, both because of higher gas and energy prices. Global gold prices were also hurt when India, the world's largest gold buyer, announced a doubling of import taxes on gold bars and coins today in order to raise cash. On the week, gold lost 3.3%, silver 4.7%, platinum 0.6%, and palladium 1.2%.

At the close: April gold slid $3.70 to $1,655.80; May silver dropped 12 cents to $32.60; April platinum lost $8.40 to $1,675.50; and June palladium fell $8.20 to $701.70 an ounce.

It was another tough week for gold, largely because of Fed Chair Ben Bernanke's silence on the subject of QE3 after this week's FOMC meeting. Hedge funds and money managers promptly lowered their net-long positions by 26% to the fewest since late January after raising them by 10% the prior week to the highest level since September. But as we reported earlier, many influential economists believe QE3 is very much alive, including Jan Hatzius, chief U.S. economist at Goldman Sachs and Mohamed El-Erian, chairman of investment giant Pimco. And in a speech on monetary policy in Frankfurt today, Chicago Federal Reserve president Charles Evans said more easing should be undertaken and interest rates should stay near zero until unemployment falls under 7%.

Even if QE3 does not occur, the macro-environment for higher gold prices is quite positive. Negative real interest rates, continuing uncertainty about U.S. and eurozone sovereign debt sustainability, and the long-term inflation risk created by many trillions of dollars in global easing over the last four years, all support higher gold this year. Although it has been trading as a risk asset in recent months while the economic outlook improved and investors abandoned Treasury bonds for higher returns, gold is traditionally a safe-haven currency and hedge against inflation. Today's reminder of inflation risk kept its losses in check, and perhaps signals the start of a return to its typical trading pattern as a long-term store of value, a role that should become even more important going forward.