Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold surged 2.2% to close above $1,084, the highest finish in nearly three weeks, as yesterday's disappointing easing package from the ECB continued to buoy the market. Enjoying its biggest one-day percentage gain since late August, gold finished the week 2.6% higher for its first weekly win since mid-October.

The European Central Bank surprised the markets with a tepid extension of its easing program yesterday, extending bond-buys by six months but holding the amount steady at 60 billion euros per month. The news caused a strong, unexpected rally in the euro. Having already priced-in far deeper easing, and the weaker euro it would engender, traders were suddenly forced to cover euro short positions, in part by selling dollars. The buck fell more than 2%, which helped gold to rise 0.7%.

Much of gold's surge today was driven by a subsequent short-covering rally. Because many traders were shorting gold in speculation that the Fed will raise interest rates this month and thereby fuel more gains in the dollar, they had to scrambled to cover contract losses after yesterday's unexpected market action, driving prices up another 2.2%.

Gold's gains came despite a 0.5% bounce in the dollar behind a solid November nonfarm payrolls report. The U.S. added 211,000 jobs last month, in line with the average monthly total for this year, while the unemployment rate stayed the same at 5%. The data solidified expectations that the Fed will vote to raise rates at their meeting in two weeks.

The other precious metals were also strongly higher for the day and week. Silver jumped 3.2% today and 3.4% this week. Platinum gained 3.9% on the day and 5.4% on the week. Palladium leapt 5.6% today to salvage a weekly rise of 2.9%.

At the Comex close: February gold surged $22.90 to $1,084.10; March silver jumped 45 cents, to $14.53; January platinum rose $33.10 to $880.60; and March palladium leapt $30.05 to $566.85 an ounce.