Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slid 0.5% to close under $2,014 as risk appetite rose on strong US economic data shifted the outlook for Q1 interest rate cuts, lifting Treasury yields and pressuring alternative assets.

US business activity rose sharply in January, according to the S&P Global flash PMI reports, with manufacturing rebounding into expansion and services surging to the highest level since last June.

Benchmark 10-year Treasury yields went from small losses to gains after the PMI prints as traders speculated that ongoing strength in the economy may prompt the Fed to begin cutting interest rates later than expected. Higher yields weigh on gold by increasing the opportunity cost for holding it instead of bonds.

The Fed fund futures markets are now pricing in the odds of a quarter-point rate cut in March at just 42%, down from 46% yesterday and as high as 80% two weeks ago. The Fed is still expected to cut rates by 1.25% to 1.5% by December, however.

Backstopping gold’s decline, the dollar fell 0.4% against major rivals as China announced a deep cut to bank reserves, shoring up its beleaguered stock market and lifting the yuan. A falling dollar helps gold and other commodities by making them less expensive in other currencies, spurring overseas demand.

The other precious metals were higher, with silver rising 1.9% while platinum and palladium picked up 1% and 2.8%, respectively.

At the New York spot close: gold dropped $9.80 to $2,013.90; silver rose 42 cents to $22.77; platinum climbed $9.40 to $914.90; and palladium advanced $26.90 to $973.70 an ounce.