Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.3% as growing anxiety over global economic weakness drove traders into the safety of the U.S. dollar. Global equities fell sharply, with the S&P 500 losing nearly 1.5% and the Global Dow more than 1.3%, while the VIX volatility index�the so-called fear index�surge by 25% to approach a seven-week high. The ICE dollar index, which measures the currency against a basket of rivals, jumped almost 1%, pressuring the gold price because gold is denominated in dollars internationally, making it more expensive for foreign investors. The other precious metals fell harder than gold on waning commodity demand. Silver dropped 1.4% while platinum and palladium fell 1.1% and 2.5%, respectively.

At the Comex close: June gold slipped $4.70 to $1,382.70; May silver fell 32 cents to $23.307; July platinum lost $15.20 to $1,435.40; and June palladium shed $16.80 to $661.40 an ounce.

While paper gold assets like ETFs and futures contracts have seen outflows, physical bullion demand has been surging. So far in April, the U.S. Mint has sold 147,000 ounces of U.S. gold eagle�more than twice the total for all of March. A spike in Asian buying has driven premiums for gold bars to an 18-month high, according to Reuters. And demand in India, the world's largest gold buyer, is expected to explode during the upcoming wedding and festival seasons, traditional times of gold purchases, because of lower prices.

St. Louis Fed President James Bullard said today that inflation is falling too much and may require an expansion of quantitative easing. Consumer inflation rose at only 1.3% in February, well below the Fed's 2% goal, as global demand continues to soften. With Europe in recession, China slowing, commodity prices falling, and Japan slashing the value of the yen by promising to double its monetary base in two years, deflation is a renewed concern for the FOMC. Bullard, whose views often influence the direction of monetary policy, sees increasing bond purchases, rather than curtailing them, as the best solution. Tantamount to printing money, quantitative easing is bullish for gold because it devalues the dollar and increases the risk of long-term inflation, driving investors into gold bullion as a store of value.