Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 0.8%, settling at a four-week low just above $1,271, on continuing worries that last Friday's strong jobs report may spur the Fed to taper monetary stimulus sooner that expected, reducing demand for the metal as a store of value. The dollar extended gains after Treasury yields jumped to their highest level in two months, also on taper bets. Because gold is denominated in dollars internationally, a rising dollar weighs on the gold price by making it more expensive to holders of other currencies.

Until the most recent non-farms payroll report handily beat expectations, most market analysts were forecasting a March or April start to reductions in quantitative easing, the Fed's program of buying $85 billion in long-term bonds each month to increase liquidity and promote job growth. Skittish traders are now shifting bets to December, despite comments from prominent Fed officials indicating their reticence to reduce stimulus prematurely.

When the new payroll numbers were released on Friday, John Williams of the San Francisco Fed stated that he wants to see several more months of data to gauge whether the economy is strong enough to roll back QE. Atlanta Fed President said today that the jobs report does not change the equation about when to taper, and that he is very cautious about 2014 growth prospects. Narayana Kocherlakota of the Minneapolis Fed, called today for increasing stimulus, not reducing it, in order to ensure a sustainable recovery. QE supports higher gold prices by devaluing the dollar and increasing the risk of long-term inflation.

The other precious metals were mixed, with silver falling 2.4% and palladium dropping 1.8%. Platinum bucked the trend by gaining 0.3% after major refiner Johnson Matthey reported supply deficits nearly doubling in 2013, from 340,000 to 605,000 ounces.

At the Comex close: December gold fell $9.90 to $1,271.20; December silver dropped 50 cents to $20.78; January platinum picked up $7.20 to $1,439.60; and December palladium lost $12.20 to $742.35 an ounce.