Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 0.5% to close under $2,029 as a shifting rate view lifted Treasury yields ahead of several important data releases, prompting investors to take profits from the metal’s 1.3% rise last week.

New data this week, especially the personal consumption expenditures index for January, should add clarity to the rate view. Due Thursday, the PCE is the Fed’s preferred inflation gauge. Durable goods orders, due Tuesday, and the initial revision of Q4 GDP, also due Thursday, will add further clues about US economic health.

Benchmark 10-year Treasury yields rose toward 4.3% as traders speculated that stronger economic activity might make the Fed less inclined to start reducing interest rates in Q2. Higher yields weigh on gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Fed fund futures now show less than a 55% likelihood that the Fed will pivot to rate cuts in June, with odds of no change at 40%, according to CME FedWatch. One week ago, the chances of the Fed standing pat were less 24%, while a month ago the odds were less than 1%.

The rate view has changed because of stronger than expected reports on inflation, payrolls, and economic growth so far this quarter, prompting Fed officials to advocate delaying rate cuts until more evidence accrues that inflation is declining.

Despite this shifting outlook, gold continues to be supported by safe-haven inflows because of the widening war in the Middle East and strong physical demand in Asia. Gold premiums to a four-month high last week in India, the world’s largest gold consumer, as jewelry dealers stocked up ahead of the traditional wedding season.

The other precious metals were sharply lower, with silver dropping 2% while platinum and palladium tumble 3.1% and 3.2%, respectively.

At the New York spot close: gold slipped $10.10 to $2,028.50; silver fell 46 cents to $22.53; platinum dropped $28.50 to $881.10; and palladium shed $31.60 to $956.90 an ounce.