Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.1% as a surprising report on U.S. manufacturing spurred appetite for riskier assets. Just one day after two regional surveys showed marked factory weakness, the national ISM index of manufacturing defied expectations by rising to its highest reading since June. The encouraging news drove up oil and equities, with the Dow closing at a four-year high. Silver and palladium declined while platinum rose slightly.

At the close: June gold dipped $1.80to $1,662.40; July silver lost 9 cents to $30.93; July platinum added 40 cents to $1,572.30; and June palladium slid $1.30 to $681.05 an ounce.

The bewildering inconsistency in recent U.S. economic data is giving investors whiplash and making it difficult for the Fed to know what to do next. After the FOMC meeting last week, Ben Bernanke made it very clear that additional quantitative easing (QE3) is still in play. Today, several Fed officials commented on the prospect of more easing, some in support and some against. Atlanta Fed President Dennis Lockhart, seen as a centrist, pretty well summed up the current stance on CNBC today, saying QE3 is "something that should be held in reserve for circumstances . . . a bit different than those we see today." In other words, recent reports offer justification in both directions, and it won�t take much to provoke the Fed into more action. Given the possibility of exogenous shocks from the eurozone, China, and the Middle East, and the internal fragility of the recovery, that's practically an endorsement for more easing.

Citigroup released its "Q2 Commodity Update" today, predicting an average gold price of $1,720 this year and $1,830 next year. The banking behemoth discounts much of the recent positive macroeconomic news as "scattered" and says the global economy "remains under deep pressure." It expects gold to be driven higher mostly on safe haven inflows because of increasing sovereign debt problems.