Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rose nearly 1% in heavy trade, erasing loses from the previous two sessions, as falling equities and a weaker dollar spurred safe-haven demand for physical bullion. A new report from the OECD, a respected international economic council, warned that exiting unconventional monetary policy is likely to put global growth at risk. At the same time, Eric Rosen of the Boston Fed suggested today that modest cuts in quantitative easing could begin in a few months. U.S. stocks fell sharply as investors fretted about slower global growth and possible reductions in monetary easing, which has fueled record-high runs in the S&P 500 and Dow by flooding the markets with cheap money and encouraging risk-taking. The dollar also tumbled, supporting higher gold prices. Silver added 1.2% while platinum and palladium, more heavily tied to industry, fell by 0.4% and 1.2%, respectively.

At the Comex close: August gold gained $12.10 to $1,391.80; July silver picked up 26 cents, to $22.45; July platinum fell $8.80 to $1,453; and September palladium dropped $9.45 to $750.10 an ounce.

With falling gold prices, record-high outflows from ETFs are being largely offset by skyrocketing purchases of physical gold in Asia, according to new information from the World Gold Council. Overall demand for physical gold bullion in Asia will hit a new quarterly record in Q2, the WGC reported, while Indian gold imports are projected to reach as much as 400 tons, 200% higher than a year earlier. China imported around 170 tons in April alone, and is on track for 880 tons in 2013, close to India's projected range of 865 to 965 tons.

"Even if ETF outflows continue in the United States," said the WGC, "it is quite likely that the gold previously held in ETFs will find a ready market among Indian, Chinese and Middle Eastern consumers who are taking a long-term view on the prospects for gold." This physical demand is expected to keep a floor under gold prices going forward.