Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold slipped 0.6% as pessimism over eurozone debt problems combined with contradictory U.S. data to draw safe-haven inflows into the U.S. dollar and Treasury bonds, away from gold. Retail sales climbed 0.8% in March, well above expectations of 0.3%, suggesting that the U.S. economy is growing at a modest pace. But growth in manufacturing slowed in the key New York Fed region, indicating that one bright spot in the recovery might be dimming. In addition, last Friday's disappointing growth data from China continues to weigh upon commodities. Silver slipped 0.1% and platinum dropped 0.8%, while palladium bucked the trend by gaining 0.5%.

At the close: June gold slipped $10.50 to $1,649.70; May silver dropped 2 cents to $31.37; July platinum dropped $12.10 to $1,575.80; and June palladium rose $3.5 to $650.70 an ounce.

Yields on Spanish bonds rose above 6%, triggering fresh worries that the banking system of the eurozone's fourth largest economy is sliding toward collapse. Costs of insuring Spain's debt are rising rapidly, with credit-defaults swaps jumping to new records, while Italian and Portuguese bonds are also being hammered by the negative sentiment. An estimated 100 billion euros have been pulled from the French, Italian, and Spanish sovereign debt markets, according the Financial Times, as investors are losing faith that eurozone governments can right themselves. Spain's Prime Minister Mariano Rajoy has called on the ECB for a bailout. And just three weeks after eurozone leaders unveiled their vaunted $1 trillion firewall against contagion, they're now seeking yet more cash from the IMF.

So here we are, after two Long Term Refinancing Operations (LTROs) by the ECB poured 1.5 trillion euros into the banking system, the region is again facing a liquidity crisis that could plunge the global recovery into a whirlpool. It is possible that this new stage in the crisis may weigh on gold in the short term as investors flee euro-denominated assets for the dollar. A stronger dollar generally suppresses the gold price. But the mid- and long-term effects are likely to be positive for gold in its role as a safe haven store of value, especially if additional policy actions by the ECB (and following suit, the Fed) feed yet more liquidity into the system, increasing inflation risk.