Gold News & Info

Source: Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.4% to close back under $1,200 as weak Asian data and speculation that the Fed may soon raise interest rates boosted the dollar, decreasing demand for alternative stores of value.

China's exports plummeted 15% year-over-year last month, far more than expected, and imports fell nearly 13% because of weaker global and domestic demand for manufactured goods. Japanese orders for machinery dropped off, signaling slowing business investment. The weaker data helped the dollar to strengthen against most rivals, pressuring gold and other commodities denominated in it for international trade.

The buck was further supported by new comments from a pair of Fed official suggesting that a June rate hike remains on the table despite weaker recent U.S. data. San Francisco Fed President John Williams, a moderate voice, said the labor market should be strong enough to prevent a serious setback in the recovery once the central bank begins to increase rates. Richmond's Jeffrey Lacker, the most hawkish Fed official, renewed his call for a June hike.

Merrill Lynch strategists predict gold above $1,500 by 2017, assisted by the Fed. Recent pressure on gold, they say, has come from anticipation of the first rate hike. Once it occurs, future hikes will be very small and slow to arrive, according to the Fed's policy statements, causing real interest rates to remain negative for a long time. Negative real rates�that is, rates below inflation�are bullish for gold because they eliminate opportunity costs for holding the metal instead of bonds.

The other precious metals were also weaker on the day. Silver and palladium dropped 0.6% while platinum fell 1.4%.

At the Comex close: June gold slipped $5.30 to $1,199.30; May silver dropped 9 cents to $16.29; July platinum fell $16.70 to $1,153.90; and June palladium slid $4.65 to $771.40 an ounce.