Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1.5% to close at $1,993 after solid US data and hawkish jawboning from some Fed members lifted yields and the dollar, undercutting alternative stores of value. It was the metal's first finish under $2,000 in two weeks.

Retail sales perked up in April, rising 0.4% after falling in four of the past five months. The gain was driven by increased auto and online purchases. Retail sales are a big part of consumer spending, which constitutes roughly 70% of GDP.

Industrial output rose 0.5% last month after two straight months of no gains, led by a 3.1% jump in utilities and a 1.2% increase in business equipment. But overall, trends in manufacturing are projected to the downside in coming months as the economy slows under higher interest rates.

Homebuilder confidence stepped higher for the fifth straight month as buyers struggle with low inventory of existing homes.

Against this upbeat background, the debt-ceiling standoff continues to weigh on market sentiment, Treasury Secretary Janet Yellen told Congress today that the government is on track to default on payment obligations for the first time ever in early June.

Benchmark 10-year Treasury yields pushed back over 3.5% as investors speculate that the stronger data may force the Fed to raise interest rates further or wait longer before cutting them. Rising yields weigh on gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

A pair of Fed members reinforced the hawkish narrative today. Cleveland Fed chief Loretta Mester said the central bank is not yet at the point of holding rates steady. Thomas Barkin of the Richmond Fed stated that he is comfortable raising rates further. The odds of a rate hike in June are hovering around 20%, according to CME FedWatch.

Tracking higher with yields, the dollar added 0.2% against major rivals, pressuring gold and other commodities by making them more expensive in other currencies.

The other precious metals were also lower, with silver sliding 1.6% while platinum dropped 0.7% and palladium retreated 2%.

At the Comex close: June gold fell $29.70 to $1,993; July silver slid 40 cents to $23.89; July platinum dropped $7.80 to $1,066.90; and June palladium lost $30.70 to $1,499.60 an ounce.