Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinNew York spot gold fell 1% to close near $2,620 despite falling inflation and downturns in Treasury yields and the dollar as traders took profits from the metal's seven-day rally, driven by aggressive Fed easing. Bullion still gained 1% for the week, its third straight weekly win, while hitting a series of new record highs above $2,600. Silver dropped 1.6% to finish at $31.52, rising 1.1% for the week.

The personal consumption expenditures index, the Fed's preferred inflation gauge, rose a scant 0.1% in August, while the 12-month inflation rate increased by just 2.2%, the lowest since April 2021. The core PCE, less food and energy, also rose 0.1%.

Meanwhile, August consumer spending increased by 0.2%, down from 0.5% in July, indicating that the main driver of the economy is slowing but not grinding to a halt. Consumer spending accounts for roughly 70% of GDP.

The weak data supports the Fed's decision last week to pivot sharply toward monetary easing by reducing interest rates by 50 basis points, the biggest rate cut in 16 years. It also opens the door to further rate cuts, perhaps of equal size, in coming months.

Fed fund futures markets are fully pricing a quarter-point rate cut at the Fed's November meeting, with the odds of another half-point cut rising to more than 54% after the data releases.

Lower interest rates are bullish for gold because they put downward pressure on Treasury yields, decreasing the opportunity cost for holding it instead of bonds for safety. And low rates weaken the dollar, making gold cheaper overseas.

Benchmark 10-year Treasury yields retreated on the inflation and spending data. Tracking with yield, the dollar fell 0.4% against major rivals.

Platinum slipped 0.3% but held a weekly rise of 2.7%. Palladium shed 2.6% today and 5% this week.

At the New York spot close: gold fell $25.60 to 2,644.30; silver slid 51 cents to $31.52; palladium dipped $2.90 to $1,008.50; and palladium lost $27.80 to $1,023.40 an ounce.