Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slid 0.4% as growing U.S. and global economic worries spurred investors to take profits from last Friday's 3.5% rally. The ISM manufacturing index fell below 50% for the first time since July 2009, signaling a serious contraction in the nation's industrial output and raising concerns that the U.S. is heading back into recession. Treasury yields fell to a one-month low on the news and the dollar immediately rallied, further pressuring the gold price. Silver also declined by 0.4% while platinum gained 0.4% and palladium lost 1.1%.

At the close: August gold slipped $6.50 to $1,597.70; September silver fell 11 cents to $27.50; October platinum gained $5.90 to $1,458.30; and September palladium lost $6.55 to $578 an ounce.

European turmoil is beginning to drag down the global economy. Eurozone manufacturing fell for the eleventh straight month while unemployment rose to 11.1%, the highest level since recordkeeping began in 1995. Chinese manufacturing also fell sharply , largely because of tumbling exports to the eurozone and U.S.

The good news for gold investors is that deepening eurozone weakness is expected to result in further monetary easing by the ECB and Bank of England next week. Traders expect the ECB to cut its benchmark rate by a quarter-point on Thursday, and to take more aggressive measures like buying sovereign debt and enacting another long-term refinancing operation (LTRO). The Bank of England is likely to expand its debt-purchasing program by 75 billion pounds, according to Credit Suisse. All of these programs will inject huge amounts of new liquidity into the markets, devaluing currencies and increasing the risk of long-term inflation, both of which are bullish for gold.