Daily Gold Update

Source: American Gold Exchange

Austin— Gold spiked abruptly to a 3-month high as safe-haven demand returned on signs that the eurozone is on the brink of recession. The dollar also rose to a 7-month high against the yen and U.S. and global equities lost ground. As we've said, gold has dual roles�sometimes it trades as a commodity, other times as safe-haven currency. In recent weeks, its commodity role had been dominant as gold gained while the dollar dropped and risk assets like stocks were also rising. Today, however, gold apparently donned its safety hat once again, surging at the end of the session while equities fell. Silver fell slightly while platinum and palladium posted strong gains because of the ongoing strike in South Africa at the world's largest platinum mine.

At the close: April gold rose $12.80 to $1,771.30; March silver dropped 18 cents to $34.25; April platinum gained $35.90 to $1,720.80; and March palladium rose $7 to $717.75 an ounce.

Only a day after getting a boost in morale from the Greek debt pact, the eurozone got more depressing news as its Composite Flash PMI, considered a reliable indicator of economic growth, registered below 50 this month, indicating contraction. The region is now officially teetering on recession. Especially alarming is weakness in France and Germany, the EU's drive wheel. China's PMI also showed more weakness with exports falling to their lowest point in eight months. And Fitch cut Greece's long-term ratings to one step above default.

Part of gold's safe-haven allure is its ability to act as an alternative store of value when fiat currencies lose value either through inflation or intentional dilution because of monetary easing. It appears this role reasserted itself in today's trade, which is really not surprising when you consider the massive easing in the eurozone, U.S., U.K., and China so far this year. As Zero Hedge points out, since gold hit $1,900 an ounce last fall, central banks have pumped an additional $2 trillion into the markets. Next month the ECB is planning to increase its already-bloated balance sheet by another 20% in order to fund the next Long Term Refinancing Operation (LTRO2). With Europe's economies slipping toward recession, more will be needed, not to mention bailouts of barely-solvent nations like Ireland, Portugal, Spain, and Italy. Ultimately, all this liquidity will also mean greater inflation risk. And with the deteriorating economic climate in Europe and China suggesting that even more liquidity is probably on the way, investors appear to be buying gold's other role again, as a safe-haven store of value and inflation hedge.