Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.4% to close at a seven-month low before gaining 0.5% after hours in electronic trade. The EU published its forecast that eurozone economies will contract again in 2013 and unemployment will climb above 12%. In addition, the ECB announced that Europe's commercial banks will repay far less than expected on LTRO bailout loans, signaling weakness in the region's financial sector. The dismal news undermined the euro and drove up the dollar, which weighed on the gold price. A stronger dollar pressures gold because it is denominated in dollars and becomes more expensive to holders of other currencies. Silver fell 0.8% to finish the week with a 4.7% loss. Platinum also dropped 0.8%, losing 4.2% for the week. Palladium added 0.2% today but lost 2.4% for the week.

At the Comex close: April gold slipped $5.80 to $1,572.80; March silver droped 24 cents to $28.46; April platinum shed $12.60 to $1,607.40; and March palladium gained $1.70 to $735.30 an ounce.

It was a tough week for gold, which fell by 2.3% because of concerns that the Federal Reserve may end its program of asset-purchases, known as quantitative easing. The minutes from the FOMC's meeting in January, released this week, showed some opposition to continuing the program. Speculators and large program-traders then triggered stop-losses, broke technical support levels, and caused gold prices to free-fall until support was found around $1,570. While additional weakness could occur, most analysts believe gold is now oversold and due for a rebound. Commerzbank's Eugen Weinberg told Bloomberg TV today that gold should resume its climb to $2,000 this year because of renewed investment interest and central bank buying.

Gold pushed $8 higher in electronic trade after hours following statements by Fed officials that QE will continue unabated. St. Louis Fed President James Bullard, a top official, stated unequivocally that the Fed will maintain its monetary stance despite concerns among some policymakers. "Fed policy is very easy and it's going to stay easy for a long time," he told CNBC television. Boston Fed President Eric Rosengren also defended the continuation of QE, saying it lowers borrowing costs and reduces the country's debt-to-GDP ratio, in addition to lowering unemployment. Bullard and Rosengren are both voting members of the FOMC, meaning they have a say in policy, whereas many of the anti-easing members are not. In addition, Fed Chair Ben Bernanke and Vice Chair Janet Yellen are strongly pro-easing. So, despite the gold market's over-reaction to this week's Fed minutes, it appears QE will go on, full speed ahead, through the end of the year. And that's bullish news for gold.