Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rallied 1.2% and the dollar dropped 0.5% after a pair of Federal Reserve officials spoke about the weakness of the U.S. economic recovery and the need to maintain supportive policies, leading traders to believe that another round of monetary easing is possible this year. Additional easing would weaken the dollar and increase inflation risk, making gold more attractive as a store of value. It would also drive gold prices higher because gold is denominated in dollars. Equities and commodities also rallied on the news, with the Dow and S&P 500 both gaining 1.4%, and oil rising slightly less than 1%. Silver led the metals with a 3.2% gain while platinum rose 1.4% and palladium 2.6%

At the close: June gold rose $20.30 to 1,680.60; May silver rallied $1 to $32.52; July platinum rose $21.70 to $1,606; and June palladium added $16.50 to $653.10 an ounce.

The Fed's second-highest ranking member, Vice Chair Janet Yellen, came out strongly today in support of extending near-zero interest rates until the end of 2015 and possibly beyond. The Fed had already been planning to keep rates at all-time lows until the end of 2014. Because "the headwinds that have been restraining the economy could lead to a longer period of sluggish growth and high unemployment," Yellen said in a speech at NYU, "I consider a highly accommodative policy stance to be appropriate in present circumstances." A few hours later, at an event in Syracuse, New York Fed President Bill Dudley, concurred that "we're not out of the woods yet," and indicated that he would support additional action by the Fed to speed up the economy.

This year's rallies in gold and stocks were driven in large part by more than $2.3 trillion of liquidity injected into the economy during two first two round of quantitative easing (QE1 and QE2), and the pervasive belief that QE3 would be forthcoming this spring. In the past six weeks, gold came under selling pressure as prospects for QE3 seemed to diminish. These two statements by important Fed officials, while they do not mean QE3 is definitely coming, do show increasing sympathy for further policy actions. And as today's rally showed, that's good for gold.