Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold declined 2.3% to hold above $2,042 as a rebound in yields and the dollar prompted traders to take profits from its recent climb to new all-time highs. After closing on Friday at a record $2,089.70, the metal jumped to a new intraday high above $2,152 in electronic trade late Sunday before slipping back.

Expectations that the Fed will cut interest rates next year, combined with safe-haven inflows from geopolitical turmoil in Ukraine and the Middle East, have fueled gold’s dramatic rise over the past two months. Dovish comments from Fed Chair Jerome Powell on Friday, seemingly endorsing the idea of a policy pivot away from rate increases, pushed gold to record highs.

But Powell also warned that the Fed is not yet thinking about rate cuts and, indeed, is “prepared to tighten policy further if appropriate.” Today, traders focused more on these sobering reminders than their hopes for lower rates.

The Fed funds futures markets are now pricing-in a 60% likelihood of a rate cut by the March Fed meeting, down from 64% after Powell’s comments on Friday.

Benchmark 10-year Treasury yields climbed back up near 4.3% on the slight shift in rate view, pressuring gold by increasing the opportunity cost for holding it instead of bonds for safety.

The dollar also regained some ground, rising 0.4% against major rivals after falling 3.1% in November. A stronger dollar is a headwind for gold and other commodities because it makes them more expensive in other currencies, limiting overseas demand.

The other precious metals were also sharply lower, with silver receding 3.7% while platinum and palladium retreated 1.2% and 2.9%, respectively.

At the Comex close: February gold lost $47.50 to $2,042.20; March silver shed 95 cents to $2.91; January platinum dropped $11 to $925.10; and March palladium declined $29.70 to $980.70 an ounce.