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Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.
May 22:
Gold rises, falls on mixed QE signals
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold closed 0.6% lower in volatile trade, and then lost another 0.3% after hours, following mixed signals from Ben Bernanke over the future of quantitative easing, the Fed's program of buying $85 billion in long-term securities each month to stimulate grow and employment.. In prepared remarks before Congress, the Fed Chair warned against the "premature tightening of monetary policy," saying it would cause interest rates to rise and put the economic recovery at risk. Traders took this statement to imply that QE was secure at current levels. Gold, Treasuries, and equities immediately rallied, with gold spiking to $36 an intraday high of $1,413, while the dollar tumbled. Tantamount to printing money, QE supports higher gold prices because it devalues the dollar and increases the risk of long-term inflation. During follow-up questions, however, Bernanke threw the future of QE back into doubt, saying that the Fed could begin stepping down QE in the next few months if the labor market improves sufficiently. While hardly a death knell for monetary easing, it was enough to panic traders and reverse the markets almost immediately. The dollar rallied while equities and Treasuries pulled back and gold tumbled more than $46 to end the session with a $10 loss. In electronic trade, prices slid another $6 after hours when the minutes from the last FOMC meeting revealed a growing number of officials in favor of reducing monetary stimulus. The other precious metals rose on the session, with silver gaining 0.1%, platinum 0.7%, and palladium 0.5%. At the Comex close: June gold lost $10.20 to $1,370.10; July silver added 2 cents, to $22.47; July platinum gained $10.80 to $1,469.20; and June palladium picked up $4.05, to $752.15 an ounce.
May 21:
Gold slips ahead of Bernanke testimony
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold slipped 0.4% and the dollar gained in choppy trade ahead of tomorrow's Congressional testimony on monetary policy by Ben Bernanke. The minutes from the last FOMC meeting will also be released tomorrow, providing more clues to the fate of monetary stimulus. Gold fell by 2% early in the session, dropping as low as $1,358 as traders positioned themselves for any signals of an imminent reduction in quantitative easing, the Fed's money-printing progam. Trading momentum quickly changed, however, after two more regional Fed presidents, James Bullard of St. Louis and New York's William Dudley, came out in support of continuing QE. The dollar gave up most of its early gains and gold rallied back by 1.6% to close just under $1,379. Silver dipped 0.3%, also in volatile trade, and platinum dropped 1.6% while palladium edged down by 0.2%. At the Comex close: June gold slipped 0.4%, to $1,378.70; July silver dipped 7 cents to $22.52; July platinum fell $23.10 to $1,461.50; June palladium dropped $1.75 to $749 an ounce. For those keeping score, that makes four Fed members speaking out in support of QE and four against in the past week. With Fed Chair Bernanke a confirmed supporter, current policy will probably remain unchanged, which is good for gold and bad for the dollar. QE has helped to boost the gold price by 60% since 2008 because it devalues the dollar and increases the risk of long-term inflation.
May 17:
Gold falls on stronger dollar, QE view
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold fell 1.6%, marking seven straight losing sessions, after the dollar rallied to its highest level since 2008 behind upbeat economic data and a chorus of Fed officials calling for reductions in monetary easing. Consumer sentiment rose to a six-year high this month, signaling greater optimism that the U.S. recovery is on track despite spending cuts and higher taxes. The Conference Board reported that the index of leading economic indicators climbed last month after a steep decline in March. The S&P 500 surged by 1% on the data and the Dow added 120 points, reducing demand for safe-haven assets like precious metals. Silver dropped 1.4% and platinum fell 1.2% while palladium finished virtually unchanged. At the Comex close: June gold ropped $22.20 to $1,364.70; July silver lost 31 cents to $22.35; July platinum slid $17.60 to $1,468; and June palladium dipped 50 cents to $740.25 an ounce. Gold was further pressured, and the dollar supported, by new calls from regional Fed Presidents to begin withdrawing monetary stimulus. Richard Fisher of Dallas, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond, and John Williams of San Francisco all said separately that the time is nigh to begin tapering the bond-buying program known as quantitative easing. Tantamount to printing money, QE has helped to boost the gold price by 60% since 2008 because it devalues the dollar and increases the risk of long-term inflation. On the other hand, Minneapolis Fed President Narayana Kocherlakota, arguably the most dovish member of the FOMC, today called for increasing monetary easing to force down interest rates and unemployment. And Eric Rosen of the Boston Fed said quantitative easing should continue at current levels. While Fed Chair Ben Bernanke has given no indication of supporting reductions in stimulus, currency traders scrambled to position themselves for its possible end, further bidding up the dollar and driving down gold prices. Gold is pressured by a stronger dollar because it is denominated in dollars internationally and becomes more expensive for holders of other currencies.
May 16:
Gold drops 0.7% on falling U.S. inflation
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold fell 0.7% to a one-month low after the Consumer Price Index dropped in April to its lowest level since November 2010. The core inflation rate, which exclude volatile food and energy prices, rose a scant 0.1%. Consumer inflation is now running at merely 1.1% annually, far below the Fed's target rate of 2% to 2.5%, which gives the central bank plenty of room to maintain or increase its bond-buying program known as quantitative easing. In the long term, QE supports higher gold prices because it devalues the dollar and increases the risk of inflation. But in the short term, diminished need for inflation-protection among investors is likely to pressure gold prices further. Silver finished flat and platinum dropped 0.3% while palladium rallied 1.6% on supply concerns because of the Lonmin mining strike in South Africa. At the Comex close: June gold dropped $9.30 to $1,386.90; July finished unchanged at $22.66; July platinum slipped $5.10 to $1,485.60; and June palladium rallied $11.70 to $740.75 an ounce. The World Gold Council published its Gold Demand Trends for Q1. Overall gold demand dropped by 13% in the first three months of the year, driven by liquidations in the paper gold markets, mainly in the U.S. However, demand for physical gold bullion among consumers and investors rose substantially around the world, especially in Asia. Global sales of gold coins increased 19% and gold bars 8.1% compared to a year earlier. Total consumption in China surged by 20% to reach 295 tons, with demand for coins and bars increasing by 22%. Indians bought more than 256 tons of gold, a 27% increase. These up-trends are expected to continue. Central banks were also big buyers, adding almost 110 tons of gold to their currency reserves. The WGC expects them to buy as much as 550 tons this year after buying 534 tons last year, 17% more than in 2011. Continued monetary easing in the world's largest economies is expected to drive central banks to diversify their currency reserves further and hedge against long-term inflation with more gold purchases.
May 15:
Gold falls 2% as dollar, equities rally
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold fell by 2%, dropping under $1,400 to its lowest close in nearly a month, as U.S. equities and the dollar extended their rallies, reducing safe-haven interest in the metal. The Dow and the S&P 500 hit new all-time highs as trading momentum has firmly shifted in the direction of risk. These gains came despite data showing that U.S. factory output declined by the most in eight months, manufacturing in the New York Fed region fell, and wholesale prices fell by the most in three years—all signs of a very sluggish economy. The dollar climbed to a nine-month high against a basket of major currencies, less because of its own solid fundamentals than because of excessive weakness elsewhere. Central bankers from Europe to China, Japan to Australia have devalued their currencies to stimulate economic growth. The eurozone's recession has extended to a sixth straight quarters after France's GDP contracted by 0.2% and Germany's rose at a paltry 0.1% during Q1. The U.S. looks relatively strong by comparison, and in order to buy U.S. stocks or Treasuries, foreign investors must first buy dollars, which bids them up. A rising dollar pressures the prices of precious metals and other commodities because they are denominated in dollars internationally and become more expensive to holders of other currencies. The other metals were mixed, with silver falling 3.1% and platinum dropping 0.8% while palladium rose 0.3% because of a South African miner's strike. At the Comex close: June gold fell $28.30 to $1,396.20; July silver lost 72 cents to $22.66; July platinum dropped $11.20 to $1,490.70; and June palladium added $1.90, to $729.05 an ounce.
May 14:
Gold falls 0.7% on risk rally, dollar
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold fell 0.7%, posting its fourth straight losing session, as confidence about improvement in the U.S. economy stoked a risk rally in equities and the dollar, reducing gold's safe-haven appeal. Optimism among small business owners rose to a six-month high on expectations of higher sales and job growth, according to the National Federation of Independent Businesses. And the Congressional Budget Office says the U.S. budget deficit will shrink to $642 billion this year, the smallest since 2008, on higher tax receipts and inflows into the Treasury from Fannie Mae and Freddie Mac. The improvement is likely to postpone another crippling Congressional fight over raising the debt ceiling, one that could impede the recovery. The buoyant U.S. outlook helped the S&P 500 rally 1% to its eighth record high in the past nine trading sessions and pushed the dollar higher against other major currencies. Commodities fell pretty much across the board, however, as traders expect China's economy to weaken for the first time in fourteen months. The world's second-largest economy is a leading consumer of natural resource and raw materials. Holdings in SPDR Gold Trust, the world's largest gold-backed ETF, remained unchanged today after weeks of steady outflows. The bleeding from the paper gold markets, largely driven by institutional traders and hedge funds, might be coming to an end. The other metals were mixed today, with silver falling by 1.3%. Platinum and palladium each gained 1.2%, however, after a wildcat strike at South Africa's Lonmin mine triggered worries about supply interruptions. At the Comex close: June gold fell $9.80 to $1,424.50; July silver dropped 32 cents to $23.38; June palladium gained $8.45 to $727.15; and July platinum added $17.40, to $1,501.90 an ounce.
May 13:
Gold slips on retail sales, higher dollar
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold slipped 0.2% as stronger-than-expected U.S. retail sales data and talk of the Fed's plan to taper monetary easing helped to boost the dollar. Retail sales rose by 0.1% last month, a meager increase in itself but far surpassing forecasts, indicating that consumers haven’t retrenched in response to massive declines in government spending because of the so-called sequester. Combined with Friday's report of lower jobless claim, the news fueled optimism that the economy may be on the rebound. The dollar rose against major rivals, pressuring gold because it is denominated in dollar internationally and becomes more expensive to foreign investors when the dollar strengthens. Gold was further pressured—and the dollar supported —by a report in the Wall Street Journal saying that the Fed is developing an exit strategy for quantitative easing. While this is nothing new—we've known for a long time that a plan was needed—and the Fed has by no means suggested that a change is coming soon, traders nonetheless struggled to price-in the possibility of tighter monetary policies, driving the Dow and most commodities lower. Oil dropped nearly 1% and platinum slipped by 0.1%. Silver and palladium bucked the trend, gaining 0.1% and 1.8%, respectively. Palladium's gains were supported a new report from PMG refiner Johnson Matthey showing a supply deficit in palladium exceeding a million ounces and supplies of platinum at a 12-year low. At the Comex close: June gold slipped $2.30 to $1,434.30; July silver added 4 cents, to $23.70; July platinum lost $1.50 to $1,484.50; and June palladium gained $13 to $718.70 an ounce.. Continuing the divergence of paper gold markets from physical gold, which began in earnest with the mid-April price drop, holdings in gold-backed ETFs shrank to their lowest level in four years as short-term investors and speculators look toward equities. Demand for physical bullion, however, continues to be strong, especially in Asia. Indian imports rose to more than 100 tons in April and should exceed that amount in May, while Chinese gold consumption increased by more than 26% in the first quarter, year-over-year. Gold sales during India's upcoming festival of Akshaya Tritiya, considered by 900 million Hindus to be an auspicious time to buy gold, are expected to increase by as much as 50% this year.
May 10:
Gold tumbles as dollar rallies on
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold tumbled 2.2% as the dollar extended its gains against other major currencies, particularly the Japanese yen. One day after breaking the 100-yen barrier for the first time in four years, the greenback climbed above 101.5 on a combination of record-high monetary easing from the Bank of Japan and improving prospects for the U.S. job market. The dollar also gained against the Australian dollar and the euro. Because gold and other commodities are denominated in dollar internationally, they become more expensive to foreign investors when the dollar strengthens. In order to pull its economy out of persistent deflation, Japan has launched a $1.4 trillion stimulus program to double its monetary base within two years. Traders and Japanese hedge funds, which are large gold investors, are shifting into equities and the U.S. dollar, which is pressuring the gold price. In addition, ETF outflows in the U.S. continue as institutional traders seek higher-risk assets like equities, seeing little need for hedges against inflation of around 1.2%. Gold finished the week down 1.9%. Other precious metals also fell, with silver dropping 1.1% today to close the week with a 1.5% loss. Platinum dropped 2% on the day and 1% on the week, while palladium fell 1.3% today but notched a weekly gain of 1.8%. At the Comex close: June gold tumbled $32 to $1,436.60; July lost 25 cents to $23.66; July platinum fell $30.50 to $1,486; and June palladium lost $9.05 to $705.70 an ounce.
May 9:
Gold slips 0.4% on jobless claims, dollar rally
Source: Dr. Bill Musgrave, American Gold Exchange
Austin
-- Gold slipped 0.4% as reduced jobless claims helped to spur a rally in the dollar. New claims for U.S. unemployment benefits dropped by 4,000 to 323,000 last week, the lowest level since early 2008. The surprising improvement fueled hopes that the labor market may be healing despite large federal spending cuts, potentially reducing pressure on the Fed to expand quantitative easing and further undermine the dollar. The dollar rallied nearly 1% on the news, pressuring the gold price because gold is denominated in dollars internationally. Silver slipped 0.1% while platinum and palladium rallied 0.8% and 2.4%, respectively. At the Comex close: June gold slipped $5.10 to $1,468.60; July silver lost 2 cents to $23.91; July platinum added $11.60; and June palladium picked up $16.50 to $714.75 an ounce. The dollar was also supported by deeper global easing. South Korea announced a rate cut today, following similar cuts by China, Australia, India, the ECB, and the BOJ in recent weeks. Morgan Stanley and Credit Suisse expect yet more stimulus to be deployed when the Group of Seven finance ministers meet tomorrow in the U.K. Additional global easing may pressure gold in the short term because it buoys the dollar. In the longer term, however, it increases the risk of long-term inflation and spurs demand for gold as an alternative store of value.
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