Gold News & Info

Source: Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.7% to close at $1,206, ending its longest winning streak since early March, as the dollar surged after the European Central Bank signaled that it may accelerate monetary easing. Coming off a three-month high above $1,227, gold was ripe for profit-taking as traders position for this week's releases of new CPI data and the recent FOMC minutes, both of which could suggest the direction of U.S. monetary policy.

Senior ECB official Benoit Coeure said today that the recent spike in European bond yields has undermined the effectiveness of quantitative easing, the ECB's Fed-style program of asset-purchases. The central bank may therefore buy even more bonds than originally scheduled over the next few months. Tantamount to printing money, QE seeks to combat deflation and stimulate growth by flooding the economy with new cash.

The euro plunged on the news, driving the dollar higher by 1.6%. The buck was also supported by a report that new housing starts in the U.S. rose by 20% in April, the most in eight years. Although at odds with yesterday's report that home-builder confidence has fallen in May, the data raises hopes that a rebound in the crucial housing market will help GDP growth bounce back in Q2 after tumbling to just 0.2% in Q1.

Gold's recent strength�and the dollar's weakness�have been driven by speculation that the Fed will be unable to raise interest rates before September, or even December, because of subpar Q1 growth and a long string of weak Q2 data. Those bets could change, however, if the minutes from the last Fed meeting, due on Wednesday, signal a disposition to hike sooner, or if Friday's CPI numbers surprise to the upside. Either scenario would likely support the dollar and pressure gold.

The other precious metals were hot even harder by hit by the surging dollar. Silver tumbled 3.7% while platinum and palladium lost 2.3%. Oil dumped more than 3%.

At the Comex close: June gold fell $20.90 to $1,206; July silver tumbled 66 cents to $17.07; July platinum lost $27.60 to $1,150.90; and June palladium slid $17.85 to $775.15 an ounce.