Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rallied 1.2% to a one-month high as optimism over the U.S. fiscal cliff and aid to Greece fueled global risk appetite, driving demand for the metal as an inflation hedge. Reports that Republican and Democrat leaders are open to compromise on fiscal negotiations gave equities their best day in more than two months, with the S&P 500 gaining almost 2% and the Global Dow almost 2.2%. In addition, finance officials from Germany, France, Spain, and Italy met today to work out a solution to Greece's debt problems, adding to hopes that the eurozone debt crisis might soon come under control. The dollar fell while the GSCI commodities index rose to a one-month high. The other precious metals rose strongly, with silver gaining 2.5% to a one-month high, platinum adding 1.4%, and palladium 3%.

At the Comex close: December gold rallied by $19.70 to $1,734.40; December silver gained 82 cents to $33.19; January platinum added $22, to $1,583.80; and December palladium jumped $18.85 to $645.30 an ounce.

Gold is important in a portfolio because of its dual nature. It can trade as a commodity, rising with risk assets and commodities as an inflation hedge during periods of economic growth, and also as a safe-haven currency of last resort, thriving under conditions of economic uncertainty and geopolitical turmoil. Today, both roles were active as it rallied on commodity-demand and also received safe-haven support from the escalating violence between Israel and Hamas in the Gaza strip.

Because of this dual nature, gold is well-positioned for either side of the fiscal-cliff trade. If negotiations break down, it is likely to see more safe-haven inflows because of economic uncertainty. If negotiations succeed and the fiscal cliff is averted, gold is likely to rise with other commodities and risk assets. Add in the growing likelihood that the Fed will expand QE3 to include additional purchases of long-term Treasuries, perhaps as early as next month, and gold is sitting pretty to close out the year.