Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.2% as stronger-than-expected U.S. retail sales data and talk of the Fed's plan to taper monetary easing helped to boost the dollar. Retail sales rose by 0.1% last month, a meager increase in itself but far surpassing forecasts, indicating that consumers haven�t retrenched in response to massive declines in government spending because of the so-called sequester. Combined with Friday's report of lower jobless claim, the news fueled optimism that the economy may be on the rebound. The dollar rose against major rivals, pressuring gold because it is denominated in dollar internationally and becomes more expensive to foreign investors when the dollar strengthens.

Gold was further pressured�and the dollar supported �by a report in the Wall Street Journal saying that the Fed is developing an exit strategy for quantitative easing. While this is nothing new�we've known for a long time that a plan was needed�and the Fed has by no means suggested that a change is coming soon, traders nonetheless struggled to price-in the possibility of tighter monetary policies, driving the Dow and most commodities lower. Oil dropped nearly 1% and platinum slipped by 0.1%. Silver and palladium bucked the trend, gaining 0.1% and 1.8%, respectively. Palladium's gains were supported a new report from PMG refiner Johnson Matthey showing a supply deficit in palladium exceeding a million ounces and supplies of platinum at a 12-year low.

At the Comex close: June gold slipped $2.30 to $1,434.30; July silver added 4 cents, to $23.70; July platinum lost $1.50 to $1,484.50; and June palladium gained $13 to $718.70 an ounce..

Continuing the divergence of paper gold markets from physical gold, which began in earnest with the mid-April price drop, holdings in gold-backed ETFs shrank to their lowest level in four years as short-term investors and speculators look toward equities. Demand for physical bullion, however, continues to be strong, especially in Asia. Indian imports rose to more than 100 tons in April and should exceed that amount in May, while Chinese gold consumption increased by more than 26% in the first quarter, year-over-year. Gold sales during India's upcoming festival of Akshaya Tritiya, considered by 900 million Hindus to be an auspicious time to buy gold, are expected to increase by as much as 50% this year.