Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold futures rallied another 0.3% to close above $2,067 as an increasingly dovish outlook on interest rates eroded Treasury yields and lifted alternative assets. It was the metal’s fifth day of gains and highest finish in more than three years.

One day after Fed Governor Christopher Waller, an influential hawk, suggested that the Fed “start lowering the policy rate” if inflation continues to fall, more Fed officials have signaled that the most aggressive rate-hike cycle in a generation may well be over.

Cleveland Fed President Loretta Mester said today that current interest rates are “in a good place” and can “respond appropriately to the evolving outlook.” Atlanta Fed President Raphael Bostic said his staff has found that companies were losing pricing power, confirming his view that “inflation keeps falling.”

Richmond Fed President Tom Barkin said he thinks firms will not give up pricing power “until they have to,” so inflation will be more stubborn than he would like.

Still, traders are increasing betting that rate hikes are over and rate cuts are coming. CME FedWatch puts the odds of at least a quarter-point reduction by May at nearly 78%, up from 65% yesterday and 42% a month ago.

Benchmark 10-year Treasury yields continued to erode on the dovish outlook, slipping under 4.3%. Lower yields support higher gold prices by decreasing the opportunity cos for holding it instead of bonds.

Gold’s gains came despite an upward revision in Q3 GDP to 5.2% from an initial 4.9%. But eye-popping number is widely expected to be a one-off driven by unusually large government and household spending. Q4 GDP is projected to fall to between 1% and 2%, according to recent forecasts from the Atlanta Fed.

The other precious metals were mixed, with silver rising 0.6% while platinum and palladium lost 0.9% and 2.5%, respectively.

At the Comex close: February gold added %+$6.90 to $2,067.10; March silver rose 14 cents to $25.44; January platinum slid $8.80 to $941.40; and March palladium shed $27 to $1,041.50 an ounce.