Gold News & Info

Source:Bill Musgrave, American Gold Exchange

AustinGold rebounded 1.3% to close above $1,705 as bargain-hunters swept in on expectations that the Federal Reserve will continue its extraordinary easing policies when it meets this week.

Last Friday, the metal slipped below the psychologically important $1,700 level to close at $1,683 after a surprisingly strong jobs report boosted recovery hopes despite historic unemployment and an ongoing global slowdown. This week, investors are hedging their risk appetite with alternative assets ahead of the Fed's two-day meeting that begins tomorrow.

After slashing interest to near zero and committing to unlimited quantitative easing in late March, the Fed has nearly doubled its balance sheet to more than $7 trillion. While the central bankers are likely to be encouraged by the 2.5 million jobs added in May, they are just as likely to see the need for ongoing stimulus to lift the economy out of its deepest dive since the Great Depression.

Tantamount to printing money, QE floods the financial system with cheap cash to promote spending and lending, debasing the dollar's purchasing power and increasing the risk of long-term inflation. Gold thrives in this environment, rising to its record high above $1,911 in 2011 behind limited QE.

In addition, near-zero interest rates make gold more attractive because they eliminate the opportunity cost for holding the metal, which provides no yield itself.

The promise of more cheap cash also lifted Wall Street, capping gold's gains. The Dow added 1.5% while the S&P 500 and Nasdaq both rose 1%.

The dollar fell 0.3% against major rivals led by safe-haven currencies like the yen and Swiss franc. A weaker buck lifts gold and other commodities priced in it for global trade by making them less expensive overseas.

The other precious metals were also higher, with silver rising 2.4% while platinum and palladium climbed 3.7% and 4.3%, respectively.

At the Comex close: August gold gained $22.10 to $1,705.10; July silver rose 41 cents to $17.89; July platinum added $30.80, to $861.20; and September palladium jumped $84.30 to $2,036.90 an ounce.