Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1.5% to close under $2,033 as yields and the dollar climbed ahead of the release of the Fed minutes from December, prompting traders to take profits from the recent rise to a new all-time high.

The metal then recovered around $10 in after-hours trade as yields retreated on soft US data despite signals from the Fed minutes that additional rate hikes are possible.

At their meeting in mid-December, Fed officials appeared increasingly confident that inflation is coming under control. In the minutes released today, they no longer described inflation as “unacceptably high” and acknowledged that “overly restrictive” monetary policy could damage the economy. “Almost all” members projected lower rates in 2024.

But the Fed was notably cautious about declaring victory, saying their forecasts for lower rates came with an “unusually elevated sense of uncertainty.” They emphasized that additional rate increases could become necessary if the economy defies expectations with continued strength.

Benchmark 10-year Treasury yields initially rose on the hawkish tone, pressuring gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Tracking higher with yields, the dollar added 0.3% against major rivals, adding to gold’s headwinds by making it pricier in other currencies, limiting overseas demand.

Spot gold rose to a new record high above $2,091 in December as falling inflation and dovish comments from Fed officials signaled that the most aggressive rate-hike cycle in 40 years was coming to an end.

Fed fund futures traders became slightly less optimistic after the minutes, dropping the odds of a March rate cut to 70% from 79% yesterday. The market is now pricing in a 65% likelihood of six quarter-point decreases this year, down from 71% yesterday.

Data released today point to a softer economy, helping gold recover a bit while yields and the dollar lost late-session ground. The ISM manufacturing index shark for the fourteenth consecutive month in December. Job openings fell to a 32-month low in November, according to the Labor Department, suggesting that the red-hot job market is cooling.

The other precious metals were mixed. Silver and palladium dropped 3.3% and 1.2%, respectively, while platinum picked up 0.2%.

At the New York spot close: gold lost $30.20 to $2,034.20; silver shed 79 cents to $22.95; platinum added $1.60, to $987.10; and palladium slid $12.80 to $1,071.10 an ounce.