Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.4% to an eight-month low and commodities sold off across the board in the wake of weakening U.S. economic data. ADP reported a meager increase of 158,000 private-sector jobs in March, down one-third from February and far below expectations. Following falling consumer confidence data and weaker factory output, the payrolls report suggested a slowdown in the U.S. recovery. Equities had their worst day in five weeks as risk-aversion swept the markets, with the Dow losing more than 100 points and the S&P 500 dropping more than 1%. The S&P GSCI index of 24 raw materials dropped 2.1%, its largest decline since early November, pulling precious metals lower. Silver fell 1.7% while platinum and palladium shed 2.1% and 1.8%, respectively.

At the Comex close: June gold lost $22.40 to $1,553.50; May silver fell 45 cents to $26.80; July platinum dropped $32.30 to $1,541.90; and June surrendered $13.95 to $755.45 an ounce.

Gold sometimes trades as a safe-haven currency, rising on flights to safety, and at other times as a commodity, falling on economic weakness and risk-aversion. Today it was firmly in the commodity camp, in large part because of the preponderance of short-term traders in the paper-gold market for ETFs. As Marketwatch reported today, the markets for paper and physical gold are diverging as speculative traders chase hotter asset classes like equities. Holdings in the SPDR Gold Trust ETF have fallen 7% this year.

However, as we discussed yesterday, demand for physical bullion remains robust in the U.S. and overseas. U.S. Mint sales of American Eagle gold bullion coins rose to 292,500 ounces in the first quarter, the third-best opening quarter since the bull market began. In dollar value, that�s $480 million in gold, more than 15% higher than the previous first-quarter high, according to Seeking Alpha. Gold imports into Turkey, the world�s fourth-largest consumer of the metal, jumped to an eight-month high in March. And central banks bought more than 535 tons last year, the most since 1964, according to the World Gold Council, a trend that is expected to continue. While paper liquidations may continue to weigh on the gold price in the short term, burgeoning physical demand by long-term investors should provide support, especially if the U.S. economic recovery slows and the eurozone deteriorates further.