Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained for a second day, rising 0.2%, as a record-setting rally in U.S. equities stoked risk-appetite and demand for commodities. Following reports that services-companies grew faster in February and home prices posted their largest year-on-year gain since 2006, the Dow surged to a new record above 14,250, its highest level since 2007. Reassurances this week by prominent Fed officials that monetary easing will continue indefinitely helped to ignite the impressive rally in risk assets. Gold variously trades as a safe-haven currency and a commodity, so it can gain during periods of increased risk-appetite, as it did today. The dollar fell and commodities surged, pulling precious metals higher. Silver added 0.4% while platinum and palladium, more directly tied to industrial demand, jumped 1.3% and 2.8%, respectively.

At the Comex close: April gold gained $2.50 to $1,574.90; May silver added 11 cents, to $28.60; April platinum rallied $19.50 to $1,585.70; and June palladium jumped $20.15 to $734.60 an ounce.

Morgan Stanley came out bullish for gold today, saying that its recent consolidation phase is nearing an end and the next catalyst for higher prices is at hand. Chief Metals Economist Peter Richardson wrote in a note to clients that "we are about to witness the third installment of the Great Monetary Easing," by which he means a long period of competitive devaluations, triggered by Japan, as nations try to leverage weaker currencies into economic growth. This next wave of easing is expected to further undermine confidence in paper money. Gold has shown considerable technical strength during its recent decline, he wrote, offering good value at current prices and the potential for substantial gains.

Bank of America Merrill Lynch now expects gold to break above $2,000 in 2014 rather than within the next few months, as it had previously forecast. The banking giant expects gold prices to average $1,680 in 2013 and $1,838 in 2014, reducing earlier forecasts by 6.9% and 9.7%, respectively, because improving economic conditions are putting upward pressure on nominal interest rates, raising the relative cost of holding gold instead of interest-bearing assets. Despite these near-term headwinds, BofA expects gold to climb above $2,000 in the longer term because of monetary easing, a declining trend in real interest rates, and growing central bank demand.