Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rebounded by 1% to close above $1,662 on a combination of bargain-hunting, renewed Asian demand, and safe-haven inflows. Global equities fell for the second day as traders repositioned portfolios in anticipation of sub-par corporate earnings for last quarter, shifting into gold and the dollar, which rose together. After dropping 2.5% in three sessions, gold drew strong demand at the lower prices, especially in Asia as celebrants prepare for the Lunar New Year, a traditional time for buying gold. The other three precious metals were mixed, with silver and platinum rising 1.3% and 1.7%, respectively, while palladium slipped 0.3%.

At the Comex close: February gold gained $15.90 to $1,662.20; March silver added 38 cents, to $30.47; April platinum jumped $26.90 to $1,583.20; and March palladium slipped $2.15 to $667.85 an ounce.

Despite recent volatility in the paper-gold markets, demand for physical gold bullion remains quite strong. In the first week of January, the U.S. Mint sold 71,500 ounces of American Gold Eagle coins and 27,000 ounces of American Buffalo gold bullion coins, well over twice as many as in all of December. Asian demand is even stronger. Volume for the physical gold contract on the Shanghai Gold Exchange hit a new record on Monday, according to Reuters in Singapore. China nearly doubled its gold imports from Hong Kong in November, the most recent month reported, because of individual investment and growing accumulation by China's central bank. And Japanese pension funds will double their gold holdings to more than $1.1 billion by 2015, according to Bloomberg, as a hedge against the Bank of Japan's program of fighting deflation.

In the meantime, Deutsche Bank has lowered its forecast for average gold prices in 2013 and 2014. The investment giant now expects gold to average $1,856 this year and $1,900 next year, both of which would be record-high annual averages. Other investment banks have also lowered their forecasts recently, including Goldman Sachs and Credit Suisse. Decreased risk of financial crises and the increasing possibility of monetary tightening by the Fed may slow gold's momentum in coming years, the forecasters say.