Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinNew York spot gold jumped 1% to close above $$2,346 after another round of soft US economic data reinforced expectations the Fed will cut interest rates this fall, pressuring yields and the dollar while boosting alternative assets. Silver rose 1.1% to finish at $30.64 an ounce.

The ISM reported that US manufacturing fell to a three-month low in April behind fewer new orders and reductions in business investment. The index dropped under 48% from above 49% in March, where any reading under 50% signals contraction.

Separately, construction spending declined for a second month as businesses and government delayed projects because of high interest rates. Spending fell 0.1% in April, well below forecasts of an increase of 0.2%.

Coming after last Fridays PCE print showing inflation stabilizing last month, the soft data cemented expectations rate cuts are coming this fall. Fed fund futures traders see a greater than 50% likelihood of a quarter-point cut in September. Additional clarity should come with this Fridays nonfarm payrolls report for May.

Benchmark 10-year Treasury yields receded to just above 4.4% on the shifting rate view, supporting gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Tracking with yields, the dollar lost 0.5% to hit a three-week low against major rivals. A weaker dollar boosts gold and other commodities by making them less expensive in other currencies.

Platinum fell 1.8% while palladium rose 2.9%.

At the New York spot close: gold gained $23.70 to $2,346.60; silver rose 34 cents to $30.64; platinum dropped $19.20 to $1,022.80; and palladium picked up 25.84 to $925.04 an ounce.