Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold surged 2.2% to close at a three-week high above $1,261 as a short-covering rally combined with a weaker dollar to build technical demand. Hedge funds and other money managers continued yesterday's bidding action, unwinding bets on lower gold prices in light of expectations that the Fed will promise near-zero interest rates for the foreseeable future at next week's meeting. Bargain-hunting also boosted gold prices, which were over-sold last week in anticipation of reductions in quantitative easing. The so-called taper may arrive as early as this month but appears already to have been factored into the gold market.

Gold received some safe-haven interest as U.S. equity markets rolled back, with the Dow and S&P 500 both giving up 0.3%. The ICE dollar index fell for the fourth straight session, supporting precious metals and other commodities that are priced in dollars for international trade and become less expensive when the dollar weakens. Silver jumped 3.1% while platinum and palladium gained 1.5% and 0.5%, respectively.

At the Comex close: February gold surged $26.90 to $1,261.10; March silver jumped 61 cents to $20.32; January platinum gained $20.20 to $1,388.70; and March palladium added $3.45, to $738.45 an ounce.