Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold tumbled 3.1% to under $1,213, its lowest close in a week, after better-than-expected jobs data reinforced expectations that the Fed will begin tapering monetary stimulus this fall. U.S. non-farm payrolls added 195,000 jobs in June, and totals for April and May were revised higher by a combined 70,000. The unemployment rate remained unchanged at 7.6%, however, indicating little overall improvement in the job market. Still, economists viewed the report as giving the Fed room to begin stepping back quantitative easing, its program of buying $85 billion in bonds each month to stimulate growth and reduce unemployment, as soon as September.

The upbeat jobs report caused the dollar to surge 1.6% to a three-year high against a basket of major rivals. Treasury yields spiked higher on the belief that reduced easing will drive up long-term interest rates. The greenback was also bolstered by reports that the central banks of Europe and the U.K. are likely to loosen monetary policy in coming months. A rising dollar pressures the gold price because gold and other commodities are denominated in dollars internationally, making them more expensive to holders of other currencies. The other precious metals followed gold down, with silver dropping 4.9%, platinum 1.5%, and palladium 1.2%.

At the Comex close: August gold tumbled $39.20 to $1,212.70; September silver dropped 96 cents to $18.74; October platinum lost $20.40 to $1,326.40; and September palladium shed $8.15 to $677.55 an ounce.

Bloomberg reports that gold traders are the most bullish a month because of the resurgence of the eurozone debt crisis. Two senior Portuguese officials resigned last week amidst a budget crisis, sending government bond yields above 8%. The resignations called into question Portugal's political stability and its ability to meet bailout obligations. Worries are also building that Greece may fail to qualify for the next installment of its bailout aid and resume its slide toward insolvency.

Demand for physical bullion remains quite strong overseas. Turkey doubled its gold imports to 45 tons in April and then added another 43 tons in both May and June, driven by increased jewelry demand. Premiums for gold in China and India continue to rise as demand outstrips available supply.