Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold rose more than 0.5% to close at a five-month high near $1,700 after soft August manufacturing data in the U.S., China, and Europe further stoked expectations of monetary easing on a global scale. The ISM gauge of U.S. factory output notched a third straight month under 50%, its longest contraction in three years. Chinese manufacturing fell to a nine-month low and eurozone factories saw their steepest monthly decline in three years, marking thirteen straight months of contraction. Traders see this pervasive weakness as increasing the odds that the Fed, ECB, and central bank of China will provide additional monetary stimulus in coming weeks, increasing the long-term risk of inflation and driving prices for inflation-hedges like precious metals higher. Silver rallied by 2.6% while sister metals platinum and palladium gained 1.1% and 1.6%, respectively.

At the close: December gold gained $8.90 to $1,696.60; December silver added 81 cents, to $32.25; October platinum gained $16.50 to 1,553.80; and December palladium rose $8.60 to $638 an ounce.

In a closed-door session yesterday, ECB President Mario Draghi reportedly told the European Parliament in Brussels that eurozone borrowing costs are out of control and the ECB must undertake bond purchases�commonly known as quantitative easing�in order to save the euro. Draghi's dire conclusion comes one day after Moody's downgraded the EU's AAA rating to negative, and less than a week after Fed Chair Ben Bernanke, during the Fed's retreat in Jackson Hole, made his strongest case yet in support of QE3. Worsening manufacturing conditions, combined with weak or negative growth and persistently high unemployment, will add to pressure on the ECB and Fed to loosen monetary policies yet again.

Thomson Reuters GFMS, the respected London-based consultancy, said central banks will increase gold purchases to a record 493 metric tons this year, nearly 8% more than last year, which was itself a record. Like private investors, central banks are buying gold in order to diversify away from the dollar and to guard against inflation brought about by currency debasement.