Daily Gold Update
Current precious metals news

Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.

February 22: Gold spikes to 3-month high

Source: American Gold Exchange

Austin -- Gold spiked abruptly to a 3-month high as safe-haven demand returned on signs that the eurozone is on the brink of recession. The dollar also rose to a 7-month high against the yen and U.S. and global equities lost ground. As we've said, gold has dual roles—sometimes it trades as a commodity, other times as safe-haven currency. In recent weeks, its commodity role had been dominant as gold gained while the dollar dropped and risk assets like stocks were also rising. Today, however, gold apparently donned its safety hat once again, surging at the end of the session while equities fell. Silver fell slightly while platinum and palladium posted strong gains because of the ongoing strike in South Africa at the world's largest platinum mine.

At the close: April gold rose $12.80 to $1,771.30; March silver dropped 18 cents to $34.25; April platinum gained $35.90 to $1,720.80; and March palladium rose $7 to $717.75 an ounce.

Only a day after getting a boost in morale from the Greek debt pact, the eurozone got more depressing news as its Composite Flash PMI, considered a reliable indicator of economic growth, registered below 50 this month, indicating contraction. The region is now officially teetering on recession. Especially alarming is weakness in France and Germany, the EU's drive wheel. China's PMI also showed more weakness with exports falling to their lowest point in eight months. And Fitch cut Greece's long-term ratings to one step above default.

Part of gold's safe-haven allure is its ability to act as an alternative store of value when fiat currencies lose value either through inflation or intentional dilution because of monetary easing. It appears this role reasserted itself in today's trade, which is really not surprising when you consider the massive easing in the eurozone, U.S., U.K., and China so far this year. As Zero Hedge points out, since gold hit $1,900 an ounce last fall, central banks have pumped an additional $2 trillion into the markets. Next month the ECB is planning to increase its already-bloated balance sheet by another 20% in order to fund the next Long Term Refinancing Operation (LTRO2). With Europe's economies slipping toward recession, more will be needed, not to mention bailouts of barely-solvent nations like Ireland, Portugal, Spain, and Italy. Ultimately, all this liquidity will also mean greater inflation risk. And with the deteriorating economic climate in Europe and China suggesting that even more liquidity is probably on the way, investors appear to be buying gold's other role again, as a safe-haven store of value and inflation hedge.

February 21: Gold surges 1.9% on Greece pact

Source: American Gold Exchange

Austin -- Gold surged 1.9% to a two-week high as eurozone ministers finally approved a second bailout of Greece. We said a week ago to expect a significant risk-rally for gold once the agreement fell into place and that's exactly what happened today. Bonds fell and equities also rose strongly, with the Dow surpassing 13,000 for the first time since 2008, before falling back as lingering questions about eurozone stability tempered growth expectations. The other precious metals surpassed gold, with silver gaining a whopping 3.7%, platinum 3.1%, and palladium 3.3%. Oil also gained 2.5%.

At the closes: April gold rose $32.60, to $1,758.50; March silver leapt $1.21 to $34.43; April platinum gained $51o $1,684.90; and March palladium picked up $22.65to $710.75 an ounce.

After months of delays and consternation, Greece was finally awarded 130 billion euros in aid, which brings the total so far to at least 386 billion euros dedicated merely to save Greece, Ireland and Portugal from bankruptcy. Spain and Italy are also expected to need help. But few analysts are confident that these actions have done anything more than postpone catastrophe. Because of the draconian austerity measures imposed upon it, as Bloomberg reported today, “The danger of Greece saving itself into economic depression and having to default and exit the common currency zone remains substantial,” said Christian Schulz, an economist at Berenberg Bank in London. In the mean time, gold will continue to benefit from low global interest rates and central bank easing required to keep the eurozone afloat and stimulate the struggling economies of the U.S., China, the U.K, and elsewhere.

February 20: Gold gains on Greece hope, China easing

Source: American Gold Exchange

Austin -- Gold gained and the dollar slid as optimism that the long-awaited bailout of Greece would be approved by EU ministers today stoked global appetite for risk assets and commodities. Copper, which is strongly linked with expectations for global growth, gained more than 1.5%. Oil reached a 9-month high over $105 per barrel as Iran threatened to cut off oil supplies to more nations.

U.S. markets were closed for Presidents Day. In electronic trade on Comex, April gold rose $10.10, or 0.6%, to $1,736 an ounce.

Also supporting gold was China's decision to cut its reserve ratios in bank lending. Intended to increase liquidity and stimulate China's slowing economy by pumping some $64 billion into the banking system, this move is yet another installment in the recent trend of monetary easing by central bankers around the world. The Bank of Japan, the Bank of England, the ECB and the Federal Reserve have all undertaken more easing this year in a concerted effort to support the fragile world economy and prevent deflation. As we've reported in recent weeks, most analysts believe this monetary excess will result in higher gold prices this year and increased inflation risk in years to come. Gold has already gained nearly 11% in 2012.

February 17: Gold dips; gold traders more bullish

Source: American Gold Exchange

Austin -- Gold dipped slightly today, finishing flat for the week as U.S. investors took profits before the long Presidents Day weekend. Although jitters remain over the Greek bailout impasse, rising expectations of an agreement on Monday lifted the euro against the dollar and rallied the Global Dow. Gold was mildly supported by reports that CPI core inflation is up 2.3% over the past year — the largest gain since September 2008. For the week, silver dropped 1.1%, platinum 1.6%, and palladium 1.2%.

At the close: April gold dropped $2.50 to $1,725.90; March silver lost 15 cents to $33.22; April platinum gained $7.80 to $1,633.90; and March palladium lost $8.50 to $688.10 an ounce.

Despite assurances that a Greek debt deal will be finalized on Monday, ministers of the solvent eurozone nations (Netherlands, Germany, Finland) are suddenly saying the EU can withstand a default by Greece. Alexander Stubb, Finland’s Europe minister, told the Financial Times: “I am not advocating a Greek default, hard or soft, but I’m not excluding the possibility of it if the Greeks don’t get their acts together. Europe is prepared." Whether this statement is whistling in the dark or a concession that default is inevitable is difficult to say. The world's biggest banks are not so sanguine about the ramifications of default, however. As Zero Hedge reported today, the twenty-one Primary Dealers for U.S. government securities have been quietly buying up U.S. Treasurys at a rate not seen since early 2009, when the world financial system was in freefall. Last week alone they bought $37 billion, bringing their total to an all-time high $102 billion. In other words, the big boys are positioning themselves for maximal protection and liquidity in the event of systemic financial contagion.

Gold dealers are increasingly bullish, according to a Bloomberg survey released today, with more than 80% expecting prices to rise next week. Demand is up worldwide. As we reported yesterday, the World Gold Council released data showing that global demand for gold in 2011 rose to 4,067.1 tonnes, worth an estimated $205.5 billion, which is a new record. Much of the increase came from investors but Central banks are also expanding their bullion reserves, adding 439.7 tons last year, the most in almost five decades. They're expected buy a similar amount in 2012, with China leading the way. And billionaire hedge-fund manager John Paulson told his investors that it's time to buy gold to hedge against inflation and runaway government spending. “By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position in gold,” he said in a newsletter obtained by Bloomsberg. Gold has risen 9.9% this year.

February 16: Gold gains on risk appetite, weaker dollar

Source: American Gold Exchange

Austin -- Gold gained modestly today as a euro rally weakened the dollar and oil prices above $102 stimulated demand for gold as an inflation hedge. Positive U.S. economic news including a 1.5% jump in new housing construction starts, a strong manufacturing report from the Philadelphia Fed, and a four-year low in unemployment filings helped to diminish the dollar's safe-haven appeal and increase risk appetite for gold and equities. The other metals were mixed.

At the closes: April gold rose 30 cents to $1,728.40; March silver dipped 4 cents to $33.37; April platinum lost $12.10 to $1,626.10; and March palladium gained $12.95to $696.60 an ounce.

Uncertainty continues to surround the Greek rescue deal as EU ministers call for yet more assurances that Greece will follow through on strict austerity measures. The euro rallied nonetheless when word came down that some European central banks are willing to swap their holdings for Greek bonds, a move that's consider essential if the bailout is to work. In return, the ECB has secured protection against forced losses on its Greek government bonds.

The World Gold Council released its latest Gold Demand Trends today, covering Q4 and Full-Year 2011. It reports that global demand for gold in 2011 rose to 4,067.1 tonnes, worth an estimated $205.5 billion, which is a new record. The main driver for this increase was the investment sector where annual demand was up 5% over the previous record, set in 2010. India, China, and Europe are the pre-eminent markets, and central banks continued last year's trend of being net buyers of gold. The report predicts that China will eclipse India as the world's largest gold market this year for the first time, "as both growth and inflation remain relatively high, driving local consumers to invest in bullion to protect their wealth." The exploding middle class in China is likely to support higher gold prices for years to come.

February 15: Safe-haven gold gains on euro doubts

Source: American Gold Exchange

Austin -- Gold gained 0.6% today as more grim news about the eurozone revived safe-haven demand. We've mentioned before that gold can operate as both a commodity and a safe-haven currency. At times, it gains on positive economic news because growth stimulates inflation and demand for commodities. At other times, it operates as an alternative store of value and currency of last resort, gaining on macroeconomic pessimism and major geopolitical shocks. For most of 2011, its safe-haven role was at the fore as investors sought refuge from sovereign debt problems. So far in 2012, driven by loose monetary policies and economic growth in the U.S., gold has correlated more with risk, climbing alongside equities. Today, safe-haven demand took precedence again as growing concerns about the eurozone and Middle East drove investors back to safety. The dollar, silver, and platinum rose alongside gold as equities fell.

At the closes: April gold gained $10.40 to $1,728.10; March silver added 6 cents to $33.41; April platinum gained $10.20 to $1,638.20; and March palladium lost $3.60 to $683.65 an ounce.

A new bailout for Greece is still on hold as anxious EU ministers fret over its ability to change its spendthrift ways. In the mean time, new data show that Greece's economy contracted by a whopping 7% last quarter and 6.6% for the year, much more than expected, as austerity measures take their toll. Fears are growing that even with a 130 billion euro bailout, Greece won’t grow fast enough to lower its debt-to-GDP ratio enough to avoid eventual insolvency. The same fears are building about Portugal, widely viewed as the next domino to fall, where the economy is expected to shrink by 3% this year. Italy and the Netherlands also shrank in Q4.

John Paulson, legendary manager of the $23 billion hedge fund Paulson & Co, told clients that Greece is likely to default by the end of March, triggering the breakup of the euro. According to Bloomberg, he said the euro "is structurally flawed and will eventually unravel." What's more, "a Greek payment default could be a greater shock to the system than Lehman's failure, immediately causing global economies to contract and markets to decline." When you recall that Paulson's fund made billions anticipating the Lehman collapse and financial meltdown of 2009, his words are worth heeding.

In good news for the gold market, billionaire investor George Soros nearly doubled his fund's stake in the SPDR Gold Trust in Q4, according to the SEC. And in expectation of QE3 this spring, China added $9.5 billion in U.S. mortgaged-backed securities, the bonds targeted for purchase by the Fed. According to George Concalves, head of rates research at Nomura, “The Chinese have always viewed QE2 as an aggressive act by the Fed. It seems like this time around they are positioning to profit from QE3 when it comes.” Additional easing is widely seen as bullish for gold because it devalues the dollar and increases inflation risk.

February 14: Gold down on yen easing, eurozone troubles

Source: American Gold Exchange

Austin -- Gold lost ground for a third straight session as a surprise 10 million-yen-round of quantitative easing in Japan and a slew of bad eurozone news spurred a dollar rally. Because gold is denominated in dollars, the gold price tends to drop as the dollar strengthens. Also weighing on gold was a report that U.S. retail sales fell short of forecasts, which undermined risk appetite and also dragged equities lower. Gold has been correlating with risk in recent weeks. Gold lost 0.4% and silver 1.1%, while platinum and palladium, more sensitive to macroeconomic influences upon industrial demand, led the declines with losses of 1.3% and 1.6%, respectively.

At the closes: April dropped $7.20 to $1,717.70; March silver lost 37 cents to $33.35; April platinum fell $21.70 to $1,628; and March palladium sank $11.30 to $687.25 an ounce.

The hits keep coming in Europe. Late yesterday, Moody's cut the debt ratings of six European nations including Italy, Spain, and Portugal, saying “The uncertainty over the euro area’s prospects for institutional reform of its fiscal and economic framework” requires a revised negative outlook for the region. Spain dropped by two notches, the others by one. Moody's also advised that France, Britain, and Austria may lose their AAA ratings. The euro and pound sterling both dropped on the news while the dollar index jumped 0.6%.

We said yesterday that Greece's bailout had high hurdles to clear before approval by increasingly skeptical EU ministers. Today, the Financial Times reported that tomorrow's emergency meeting has been called off, raising the possibility of Greek default. The nations that retain their AAA ratings—Germany, Holland, and Finland—have little faith that Greece will enact the promised reforms. Olli Rehn, top economics official for the European Council, warns there will be “devastating consequences” if Greece defaults. "We're getting closer to default," added a eurozone official. As we've said before, a default by Greece is likely to drive the dollar higher, perhaps at gold's expense in the short term. But we'd expect a much higher gold price in the longer term as investors seek safe havens with greater upside, and central bankers on both sides of the Atlantic enact more easing measures to offset the crisis.

February 13: Gold dips on ambivalence over Greece

Source: American Gold Exchange

Austin -- After rising overnight in Asia, gold seesawed today in the U.S. before ending slightly lower as a weaker dollar was offset by lingering eurozone concerns. The Greek parliament ratified austerity measures yesterday, albeit amid violent protests, lifting the euro and taking some safe-haven inflows away from the dollar. But EU officials still have to finalize the deal. Uncertainty over whether agreement will come at the meeting on Wednesday put a crimp in risk appetite, taking away from gold. While gold is typically a safe-haven asset, it has been tracking the euro and stocks in recent weeks, and today it was caught in ambivalence over whether events in the eurozone warrant risk or safety. Silver rose 0.4% as both platinum and palladium lost ground.

At the closes: April gold dropped 40 cents to $1,724.90; March silver gained 11 cents to $33.72; April platinum fell $10.10 to $1,649.70; and March palladium lost $4.50 to $698.55 an ounce.

Lawmakers in Greece made progress toward averting default on Sunday by approving a laundry list of deep cuts required by the so-called troika—EU, ECB, and IMF officials—before qualifying for a 130 billion euro bailout package. However, a group of European ministers is voicing doubts over whether the deeply unpopular austerity measures will actually be enforced or be enough. Led by Germany, the skeptics are making more demands on Greece before final approval. According to the Financial Times, they want proof of the 325 million euros in cuts, clarification on how 15% cuts in labor costs will be achieved, and reassurance that Antonis Samaras, Greece’s likely next prime minister, will back the deal. They also want certainty that central bank loans to Greece will not be subject to the same "haircuts" that private lenders must accept. If the skeptics are satisfied and the bailout passes, we'd expect a risk-rally lifting gold higher.

Gold demand in Asia, however, remains quite strong. "The Chinese guys are still buying," a physical dealer in Hong Kong told Reuters. "Whenever there is a dip in prices, they will buy. There's no change in their attitude." Demand is also strong in India, Malaysia, Thailand, and Vietnam. Analysts remain bullish on gold in the longer term because central bank easing is expected to increase risk of inflation.

February 10: Gold burned by riots, risk aversion

Source: American Gold Exchange

Austin -- Gold retreated by 0.9% today and the dollar index gained 0.6% as yesterday's optimism over an imminent debt deal for Greece evaporated in the face of violent opposition by Greek workers. Commodity and global equity markets were also hit hard as investors shifted into cash and the perceived safety of U.S. Treasury bonds. In positive news for the gold futures market, Comex announced lower trading margins for commodities contracts including gold, silver, and platinum, which will increase liquidity for metals traders.

Adding to today's risk-aversion were reports that U.S. consumer sentiment and China's imports both declined, damping commodity demand. As we've discussed recently, gold has been correlating more highly with risk in recent weeks after the Fed pledged near-zero interest rates until late 2014. The other precious metals followed gold lower. On the week, gold lost 0.9%, silver 0.4%, and palladium 0.8%. Only platinum was a weekly winner, up 1.7% as striking South African miners restricted supply.

At the closes: April gold lost15.90 to $1,725.30; March silver gave up 31 cents to $33.60; April platinum dropped $7.80 to $1,659.80; and March palladium slid $8.25 to $703.05 an ounce.

Workers in Greece exploded in riots as government officials prepared to ratify yesterday's agreed upon package of austerity measures required by the EU, ECB, and IMF in exchange for a 130 billion euro bailout. One of Greece's deputy foreign ministers resigned in protest over the severity of the cuts. On the hook for a bond payment of 14.5 billion euros on March 20, which they cannot afford, Greece is rapidly running out of time to approve the bailout deal. According to Tony Stringer, Fitch Ratings managing director of global sovereigns, Greece “must get this deal agreed really within the next few days to enable them sufficient time and have the new bail-out money disbursed before that bond is due. If they don’t manage to achieve that, then it could be in the realm of a disorderly default.”

Contributing to negative eurozone sentiment, the S&P ratings agency downgraded 34 out of 37 Italian banks today because of their "significantly diminished ability to roll over their wholesale debt.” Italy, whose sovereign credit rating was cut to BBB+ from A last month by S&P, is facing serious debt problems of its own that could eventually require Greek-style bailouts. But because Italy's economy is the third largest in eurozone, the ramifications of a default by it would be substantially more destructive.

February 9: Gold gains on Greece accord, UK easing

Source: American Gold Exchange

Austin -- Gold gained 0.6% today as news of agreement on austerity measures in Greece propelled the euro to a two-month high against the dollar. Another round of quantitative easing in the UK also supported gold, as did surprising reports of 4.5% inflation in China despite a lower growth forecast. Demand for gold as an inflation hedge by China's exploding middle class helped to triple its gold imports in 2011. Silver tracked gold higher while platinum and palladium were slightly lower.

At the close: April gold gained $9.90 to $1741.20; March silver rose 21 cents to $33.92; April platinum lost $7.60 to $1,660.50; and March palladium lost $5.75 to $710.15 an ounce.

After weeks of missing deadlines and gnashing teeth, Greece's leaders finally agreed to 3.3 billion euros in budget cuts today, opening the door for another huge bailout from the ECB to prevent, at least for now, a chaotic default. Representatives of the IMF, EU, and ECB are working on a package that will try to bring Greece's debt-to-GDP ratio down to 120% by 2020. Under consideration is a plan to expand the range of collateral that banks can use to obtain loans from the ECB, which ECB president Mario Draghi says will provide some 600 to 700 billion euros in additional liquidity to Greece and other debt-strapped eurozone nations.

More easy money was the rule of the day in the UK, too. The Bank of England agreed to another round of quantitative easing, effectively printing another 50 billion pounds ($79 billion) and raising the total to 325 billion pounds so far. As we've said before, monetary accommodation like this is seen as unequivocally bullish for gold prices because extra liquidity debases currencies and increases future inflationary risk.

February 8: Gold down on eurozone pessimism

Source: American Gold Exchange

Austin -- Gold was down 1% today as pessimistic news from the eurozone bolstered the dollar and spurred investors to take profits after gold's 1.4% gain yesterday. Another missed deadline for a Greek debt deal weighed on the euro and commodities. Silver lost 1.3%, although platinum and palladium gained on supply disruptions because of striking South African miners. Gold is still up by 11% for 2012, supported largely by the Fed's pledge of near-zero interest rates through 2014 and expectations of QE3 this spring.

At the Comex close: April gold dropped $17.10 to $1,731.30; March silver lost 49 cents to $33.70; April platinum gained $13.30 to $1,668.10; and April palladium advanced $5.40 to $714.55 an ounce.

Investors have grown very weary of the hot-and-cold-running efforts to fix the eurozone. Part of the problem is that its myriad woes are moving targets. Now S&P says that even if private creditors agree to 70% losses on their bonds, it won’t be enough to enable Greece to reach sustainable debt levels. More central banks will have to take even greater losses, which is politically difficult. S&P also warned that credit conditions in Italy and France, which were downgraded last month, are still deteriorating despite the huge transfusion of cheap money provided by the ECB. And German exports fell precipitously in December, four times more than expected, in a scary sign that the debt crisis is dragging down Europe's strongest economy.

The prospects for QE3 got another boost today when San Francisco Fed president John Williams asserted that another round of asset purchases "would likely be the best way to provide a boost to the economy" despite recent job growth. Williams is a voting member of the FOMC so his opinion counts. As we discussed last week, gold has been correlating more highly with risk than in 2011, when it was more a safe-haven asset. Loose monetary policies in China, Europe, and the U.S. should encourage gold prices to rise alongside of equities and commodities this year, especially as the inflationary ramifications of quantitative easing come to the foreground.