Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold slid 0.7% to close just under $1,125 as the dollar rallied for a second session on renewed interest rate bets, reducing demand for alternative stores of value.

The Dollar Index added 0.4% to yesterday's 0.7% rise as the buck hit a two-week high against the euro, as traders speculated that U.S. interest rates will rise this year despite last week's decision to postpone. A stronger dollar weighs on gold and other commodities by making them more expensive to users of other currencies.

Since last week's FOMC meeting, four prominent Fed officials have stepped forward to reiterate the likelihood of tightening later this year. Dennis Lockhart of the Atlanta Fed and John Williams of San Francisco, both of whom supported the decision to wait, voiced confidence in a hike by December. James Bullard of the St. Louis Fed, who did not have a vote, Richmond's Jeffrey Lacker, who dissented from the decision, advocated again for hiking immediately.

While U.S. tightening seems inevitable, other major central banks are moving in the opposite direction because of slowing growth and rising deflationary pressure in Europe and Asia. The ECB's chief economist said yesterday that more quantitative easing is on the table, something Mario Draghi mentioned earlier this month. China is scrambling for new ways to stimulate its economy after devaluing the yuan last month; and Japan has been easing for years.

Gold's slide was backstopped by safe-haven interest as global equities tumbled. The Dow lost more than 1% and the Global Dow more than 1.5%% behind worries about the global economic slowdown after the Asian Development Bank cut its growth forecast for the region for this year and next.

The other precious metals fell harder, with silver dropping 3.1% while platinum and palladium plunged 3.8% and 0.8%, respectively.

At the Comex close: December gold slid $8 to $1,124.80; December silver dropped 47 cents to $14.76; October platinum plunged $$36.20 to $937.50; and December palladium shed $5.15 to $$10.95 an ounce.