Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell 0.6% to a 2012 low as deepening problems in Europe drove investors to shed perceived risk. Greece is seen as increasingly likely to default and leave the euro zone after a cadre of its newly-elected officials promised to revoke existing bailout agreements with the EU, ECB, and IMF. If Greece reneges it will probably default, and struggling nations like Spain, Italy, and Portugal would be further weakened by debt contagion with few options for bailouts of their own. Yields on Spanish bonds rose above 6% today, signaling the growing risk. Equities and commodities fell hard again while the dollar gained for the eighth straight session. The other precious metals also fell, with silver losing 0.2%, platinum 0.6%, and palladium 1.5%

At the close: June gold slid $10.30 to $1,594.20; July silver lost 22 cents to $29.24 ; July platinum dropped $9.10 to $1,499.20; and June palladium fell $9.20 to $613.65 an ounce.

Global demand for physical gold continues to be strong even as paper gold has weakened. Whereas bullion holdings in exchange-traded products for gold have fallen by 1.2% since their March record high, according to Bloomberg, Central banks continue to buy physical bullion. Recently, Mexico added 16.8 metric tons, worth around $906 million; Russia bought 16.5; and Turkey 11.5 tons. And as we reported yesterday China's gold imports surge 600% in the first quarter, rising from 19.7 to 135.5 metric tons. In addition, demand for physical gold is expected to gather strength in India, the largest gold consumer, now that the excise tax on gold imports has been repealed. These strong channels of physical demand should support gold well in the longer term, once current anxiety subsides.

A growing chorus of economists expects another round of quantitative easing (QE3) from the Federal Reserve to spur the slowing economy and negate the impact of Europe's spreading crisis. Yesterday, bond legend Bill Gross of Pimco and Jan Hatzius, chief economist at Goldman Sachs, said investors should prepare for additional bond purchases. Hatzius predicted that QE3 will be announced at the Fed meeting in late June. And Citigroup chief economist Willem Buiter said today that the Fed, the Bank of England, the ECB, and the Bank of Japan should all add more monetary stimulus to combat the eruo crisis. Any such action would be very bullish for gold.