Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold surged more than 2% to close above $1,608, its highest finish in three weeks, on expectations of additional stimulus from the ECB and Fed. Austria's Ewald Nowotny, a governing member of the ECB, opened the door to allowing the European Stability Mechanism (ESM) to acquire a banking license. Tantamount to monetary easing, the change would enable the eurozone's primary bailout mechanism to draw funds directly from the ECB, vastly increasing the liquidity at its disposal for transfusions into Greece, Spain, Italy, and other struggling economies. Treasurys immediately fell on news and the dollar backed off a two-year high as the euro and stock markets rallied. A weaker dollar supports higher gold because it is denominated in dollars internationally, making it less expensive for holders of other currencies. The other precious metals rose followed gold higher, with silver adding 2.4%, platinum 0.9%, and palladium 0.7%.

At the close: August gold surged $31.90 to $1,608.10; September silver added 66 cents to $27.47 ; October platinum gained $12.80 to $1,399.40; and September palladium picked up $3.65 to $565.25 per ounce.

The gold market was also buoyed by the increasing likelihood of additional stimulus from the Federal Reserve. The New York Times today confirmed that the Fed will be leaning toward more easing when it meets at the end of the month. A growing number of Fed officials believe the economy has lost momentum, especially in jobs growth, and requires more help. "The most effective tool would be additional purchases of longer-maturity securities, including agency mortgage-backed securities,� said San Francisco Fed president John Williams. From 2008 to 2010, the Fed increased its balance sheet by $2.3 trillion with these kinds of long-term bond purchases, commonly known as quantitative easing, and gold rallied by more than 85%.