Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinNew York spot gold was nearly flat, edging up slightly to hold above $2,431 as Treasury yields and the dollar inched lower on expectations of coming rate cuts from the Fed. The metal ended the week down 0.2%, recovering almost entirely from Mondays broad selloff across most asset classes. Silver slipped a nickel to $27.57 but lost 2.8% for the week.

Benchmark 10-year Treasury yields slid back under 4% after a volatile week of trading that saw yields tumbling to a multi-month low under 3.8% on Monday before rebounding later in the week. The dollar also dipped today after hitting a one-week high yesterday.

Last Fridays surprisingly soft nonfarm payrolls report, which showed the US economy adding only 114,000 new jobs while the unemployment rate rose to 4.3% in July, threw the market into a tailspin on fears of recession. Equities tumbled around 3% on Monday and gold was swept lower in knee-jerk liquidations.

Better data midweek blunted those overblown fears. First-time jobless claims fell by 17,000, signaling resiliency in the labor market, and the ISM reported that the US services sector expanded in July after contracting in June.

Despite all the market gyrations, Fed fund futures traders have cemented their expectations that the Fed will begin cutting rates in September, and perhaps by a lot. CME FedWatch puts the odds of a half-point September reduction at 73%, with more than a full 1% of total cuts by December.

Sharply lower interest rates are bullish for gold because they lower Treasury yields and make the dollar less attractive for foreign exchange traders. The former reduces the opportunity cost for holding gold instead of bonds as a safe-haven asset. The latter makes gold cheaper in other currencies, boosting overseas demand.

Platinum fell 1.6% today and 4.4% this week. Palladium dropped 3% today but added 0.4% this week.

At the New York spot close; gold gained 30 cents to $2,431.15; silver dipped to $27.48; platinum lost $15 to $929.90; and palladium lost $22.40 to $886.40 an ounce.