Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.9% to close just under $1,323 as the dollar jumped on falling eurozone inflation and rising expectations that the Fed will taper monetary easing sooner than expected. Eurozone inflation plunged to a four-year low of just 0.7%, annualized, in October, increasing the likelihood that the ECB will ease monetary policy further in order to head-off deflation. The dollar rallied against the euro, weighing on gold and other commodities that are denominated in dollars internationally and become more expensive when the dollar rises.

Gold was further pressured, and the dollar supported, by the growing possibility that reductions in the Fed's $85-billion-per-month bond-buying program, known as quantitative easing, may begin as early as December, when the FOMC meets again. The Fed voted to postpone tapering during this week's meeting, saying the economy is still too weak to withdraw stimulus. Reading between the lines of the Fed's policy statement, however, gold traders have begun to price-in the possibility of a December taper, which most economist thought unlikely until yesterday. Tantamount to printing money, QE devalues the dollar and increases the risk of long-term inflation, boosting demand for gold as a store of value. Reductions in QE, conversely, will strengthen the dollar and weigh on the gold price.

Finally, precious metals came under additional fire today as commodity funds squared their books ahead of the fiscal year end. According to Reuter, many commodity funds take profits from core positions in order to pay year-end taxes on October 31. The other precious metals followed gold lower. Silver tumbled nearly 5% while platinum lost 2.1% and palladium dropped 1.7%.

At the Comex close: December gold fell $25.60 to $1,323.70; December silver tumbled $1.12 to $21.87; January platinum dropped $31.50 to $1,448.40; and December palladium lost $12.70 to $736.80 an ounce.