Gold News & Info

Source: American Gold Exchange

Austin— Gold eased today as investors took profits after a week of solid gains. Passage of the rescue package for Greece early in the week calmed fears of an uncontrolled default (for now) and helped gold to rise with other risk assets. At the same time, expectations of additional easing in the eurozone, China, and Japan combined with the ongoing U.S. Fed's commitment to long-term zero interest rates helped to inflame inflation fears, also boosting gold. And finally, rising oil prices and deepening concerns about Iran's nuclear program helped to stimulate safe-haven inflows into gold. So, both of gold's dual roles�as wealth-generator and wealth-protector�came into play this week, which is unusual.

At the close: April gold dropped $9.90 to $1,776.40; March silver slid 22 cents to $35.34; April platinum lost $7.90 to $1,715.10; and March palladium slipped $7.65 to $710.75 an ounce.

Picking up 3% on the week, gold has now gained 13.5% so far this year. The other metals are following suit. Silver rose 6.4% this week for a whopping 27% this year; platinum added 5% on the week and 23% on the year; and laggard palladium gained 3.3% for the week and a mere 9% so far in 2012.

Rising oil prices alone have the potential to drive gold much higher in coming months and years. Oil futures pushed over $109 per barrel today and have risen more than 10% so far in February, with more than half of that increase coming this week. Iran's cessation of oil sales to France and Britain this week certainly boosted prices but that's only the beginning. A senior IMF official said today that halting Iran oil exports could result in a 30% increase in oil prices this year.

But Iran is hardly the only issue. All of the monetary easing used to keep the global economy afloat is driving higher prices for oil, and that's especially true of U.S. easing because oil, like gold, is denominated in dollars. As the Wall Street Journal reported today, commodity prices, including oil, have surged since the Fed's zero interest rate pledge, and hedge funds have begun to bet on commodity plays again. Francisco Blanch, head of commodities research at Bank of America, told Bloomberg that he expects oil prices to spike over $200 a barrel periodically over the next five years.

Rising oil means rising inflation, and gold does best during periods of high inflation combined with low interest rates. Rising oil also will impede the global economic recovery, which will make central bankers more likely to keep monetary policy loose, and cheap money helps gold to rise. And finally, as the Financial Times pointed out today, higher oil prices result more dollars ending up in foreign exchange reserves, which are increasingly being diversified away from dollars and into gold. It appears we've entered into a self-reinforcing cycle in which gold and oil could rise together for quite some time.