Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold surged 3.5% to reclaim the $1,600 level after EU leaders outlined measures to contain the spreading debt crisis and stimulate growth. Pleased investors shifted heavily from safe-haven dollars and bonds into equities and commodities, with the Dow gaining more than 2%, the Global Dow 3%, and oil more than 9% on newfound hopes for the eurozone. Gold's largest one-day rally since May came on rising commodity bets and expectations that a shift from austerity to stimulus in European policy will result in additional monetary easing and greater risk of long-term inflation. Gold finished the week up 2%. Silver jumped 5.1% today and 3.4% for the week. Platinum finished with gains of 4.5% today and 1% for the week, while sister metal palladium added 3.7% on the day but still lost 4% for the week.

At the close: August gold surged $53.80 to 1,604.20; July silver gained $1.33 to $27.58; July platinum rose $62.70 to at $1,449.10; and September palladium added $20.65 to $584.55 an ounce.

Stepping back from the precipice, EU leaders agreed to several programs that should help the failing eurozone banking sector. The European Stability Mechanism (ESM) will now be allowed to provide cash directly to failing banks rather than only to governments, thereby allowing debt-strapped nations to keep added debt off their books and protect their solvency. ESM funds may be used to stabilize bond market by buying government bonds directly, which is akin to quantitative easing. And rules for bailouts will be loosened, most likely to reduce the draconian austerity now required to qualify for aid. Borrowing costs in Italy and Spain fell immediately in response to the agreement.

Bloomberg reports that gold traders are bullish for the sixth week on expectations that the eurozone debt crisis will drive demand for gold as a safe-haven. Exchange-traded products like gold bullion ETFs reaped more that $2 billion in new investments this month, while hedge funds and other large speculators increased their bullish bets for the fourth straight week.