Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold dropped $25 to close at $1,446 as traders took profits before the release of the FOMC policy statement. Immediately following its release, however, gold quickly recouped $11 to $1,457 in electronic trade on the possibility of deeper monetary accommodations. Discussing its program of purchasing $85 billion per month in long-term bonds, the Fed intimated its openness to doing more: "The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.�

While Ben Bernanke previously said in speeches that he was open to expanding the scope of quantitative easing if conditions warranted, this was the first time an official policy statement has mentioned an increase. Traders took it to mean that easing will be with us for a while to come, and that the bias may have shifted toward looser rather than tighter monetary policies. The dollar immediately slipped on the statement, helping to lift gold prices in after-hours trade. QE supports higher gold by devaluing the dollar and increasing the risk of long-term inflation. The other precious metals fell on the day, with silver down 3.5%, platinum 2.5%, and palladium 1.9%.

At the Comex close: June gold dropped $25.90 to $1,446.20; Silver fell 84 cents to $23.34; July platinum lost $37.70 to $1,469.50; and June palladium fell $13.05 to $684.75 an ounce.

As reports roll in, evidence is building that the economic recovery is stalling again this spring, just as it did during the last two years. The ISM's index of factory output fell to 50.7, barely above contraction, as manufacturing expanded at its slowest pace of the year; and its index of employment fell to 50.2, the lowest in five months. ADP reported that U.S. companies added just 119,000 jobs last month, the fewest since September. This disappointing total followed a revised 131,000 gain in March that was smaller than initially estimated. With manufacturing, employment and inflation all down, it seems likely the Fed will, at a minimum, maintain its ultra-accommodative monetary policies throughout the year. If growth slows further, QE may well increase, as today's statement made clear, and that would be bullish for gold.