Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold tumbled 1.8%, its biggest single-day drop since November, after the release of minutes from the recent FOMC meeting showed deep divisions over when to reduce monetary easing. A growing number of Fed members pushed for reductions in asset purchases by midyear while one official advocated immediate slowing. The meeting took place before last Friday's extremely disappointing jobs data, so hawkish policy makers may have softened their opposition in light of the slowing job market. Nonetheless, the minutes prompted traders to remove bullish bets on gold and shift towards equities, helping to lift the S&P 500 to new record highs.The other precious metals followed gold's lead, with silver falling 0.8%, platinum declining 1.5%, and palladium dropped 1.7%.

At the Comex close: June gold tumbled $27.90 to settle at $1,558.80; May silver fell 23 cents to $27.65; July platinum declined $23.30 to $1,529.80; and June palladium dropped $12.15 to $720.85 an ounce.

Gold was further pressured after Cyprus announced its intention to sell nearly $525 million in gold reserves in order to finance its bailout. Goldman Sachs cut its three-month target to $1,530 and its twelve-month forecast to $1,390, citing increased momentum in the U.S. economy and minimal fallout from the financial meltdown in Cyprus. Deutsche Bank also lowered its outlook but remains much more bullish, expecting gold to average $1,637 in 2013 and $1,810 in 2014.

Cyprus fallout might be contained but the eurozone debt crisis is far from over. Italy's debt will rise to a postwar record above 130% of GDP in 2013, according to Prime Minister Mario Monti, second only to Greece in the eurozone. Slovenia and Spain were warned of "excessive" risk in their financial markets by the EU and urged to take strong action to prevent the spread contagion throughout the region. And more than a year after a crisis that nearly sank the eurozone, Greek sovereign debt remains the most volatile in the world�although Japan's is getting close, as result of the BOJ's unprecedented plan to double its monetary base in two years. This financial instability should continue to support strong demand for gold, especially physical gold, as investors in Europe and Asia seek wealth protection and hedges against currency risk.