Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold surged 1.8%, posting its largest single-day advance in nearly four months after Fed Chair Ben Bernanke voiced unwavering support for continued monetary easing during his monthly testimony before the Senate today.

Building on yesterday's gains of nearly 1%, gold raced above $1,600 for the first time since early last week, when it plummeted due to widespread speculation that the FOMC might soon end its monthly purchases of $85 billion in long-term bonds, known as quantitative easing. Bernanke put an end to such talk for now, asserting that "the benefits of asset purchases�are clear" and "monetary policy is providing important support to the recovery while keeping inflation close to the FOMC�s 2% objective." He downplayed the risks of continued easing, saying "at this point they're not of sufficient concern." Tantamount to printing money, QE has helped the gold price to rise by nearly 80% since 2008 because it devalues the dollar and increases the long-term risk of inflation. U.S. equity markets were also encouraged, with the Dow rebounding by 0.8% after yesterday's 1.5% plummet. Silver followed gold higher, gaining 0.9%, while platinum and palladium fell 0.3% and 1.3%, respectively.

At the Comex close: April gold surged $28.90 to $1,615.50; May silver for gained 27 cents to $29.32; April platinum dropped $4.20 to $1,616.50; and June palladium fell $9.60 to $741.90 an ounce

Gold received additional safe-haven support from political stalemates in Italy and the U.S. Fears are growing that Italy's inconclusive general election will result in a dysfunctional government that may undermine the structural reforms necessary to prevent the eurozone's third largest economy from slipping back toward default. Closer to home, negotiations between Congress and the Obama administration remain deadlocked over the so-called sequester, $85 billion in spending cuts for this fiscal year that will be triggered on Thursday unless an agreement is reached. Bernanke warned Congress today that the cuts would be "a significant burden" on the fragile recovery. The Congressional Budget Office forecasts that 750,000 jobs could be lost if the sequester occurs, and economic growth could be slowed by 0.6%.