Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rebounded by nearly 2% as bargain-hunters swooped in and commodity demand returned. After falling 13% over two sessions behind panicked short-selling by hedge funds and institutional traders in the paper gold market, renewed physical demand at lower prices helped to push gold as high as $1,404 before it slipped back to close above $1,387 with a gain of 1.9%.

U.S. equity markets rose and dollar fell, supporting higher prices for precious metals and commodities prices, after consumer inflation dropped by more than expected in March, reducing pressure on the Fed to curtail quantitative easing. In addition, New York Fed President William Dudley, an influential moderate on the FOMC, said the weak March jobs report underscores the need to continue the asset-buying program. Quantitative easing supports higher gold prices because it devalues the dollar and increases the risk of long-term inflation. The other precious metals also rose, with silver adding 1.1%, platinum 1.8%, and palladium 1.7%

At the Comex close: June gold gained $26.30 to $1,387.40; May silver added 27 cents, to $23.63; July platinum picked up $25.80 to $1,450.60 and June palladium rose $11.20 to $678.20 an ounce.

Gold's recent decline is seen as a buying opportunity in physical bullion by at least some central banks. Sri Lanka's central bank governor told Bloomberg TV today that �gold prices coming down gives an opportunity to various central banks across the world to improve on their holdings.� And separately, the Bank of Korea said the plunge isn't a "big concern" because central banks buy gold as part of a long-term strategy to diversify currency reserves. According to the World Gold Council, central banks bought 535 tons of gold last year, the most since 1964, and the uptrend is expected continue this year.

The lower gold prices are also expected to revive bullion demand in India, especially as festival season goes into full swing. The Akshaya Triya festival in mid-May is considered a traditional day to buy precious metals by India's 900 million Hindus. India is the world's largest consumer of gold.