Gold News & Info

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold fell another 1.6% to close at its lowest level since last July as a combination of positive housing data, jitters about the fate of quantitative easing, and rumors of massive liquidations by a troubled hedge fund caused a technical sell-off in commodities. Construction starts for new single-family homes jumped to a four-year high in January, brightening prospects for economic growth and further reducing appetite for safe havens. Gold then fell through support at $1,600 after rumors circulated that a troubled commodities hedge fund was being forced to dump its positions, causing a chain-reaction of selling that drove prices lower still. Although the rumors were unsubstantiated, the damage was done to the entire commodities sector, with S&P GSCI Spot Index of 24 commodities dropping as much as 1.6%. Silver dropped 2.7% while platinum and palladium plummeted 3% and 3.6%, respectively.

At the Comex close: April gold fell $26.20 to $1,578; March silver dropped 80 cents to $28.62; April platinum shed $50.40 to $1,647.10; and March palladium tumbled $27.75 to $736.40 an ounce.

Gold was already fragile after a string of recent losses caused its 50-day moving average to drop down near its 200-day moving average, approaching a bearish indicator called a "death cross," the spooky name for when these trendlines intersect. Although the "death cross" didn�t technically occur, talk of it fueled further selling.

Adding to gold's weakness, the minutes of the Fed's January meeting, released after the market closed, showed growing uneasiness within the FOMC about the continuation of quantitative easing. Some Fed officials voiced a desire to taper off the program of bond purchases even before the stated goals of reduced unemployment have been reached, while the majority felt that this premature curtailment would damage the economy. It is unlikely that any changes will occur in the near future because of the dominance of pro-easing members, including Fed Chair Ben Bernanke and Vice Chair Janet Yellen. Nonetheless, traders took the news to imply that QE's days are numbered, pushing the gold price lower after hours by as much as another 1% in electronic trading. Risk assets also tumbled on the prospect of reduced liquidity, with the Dow dropping more than 100 points and the S&P500 shedding 1.25%.