Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1.2% to close under $1,631 as Treasury yields and the dollar rose sharply on the prospect of higher interest rates to come, undercutting alternative stores of value. It was the metal's lowest finish since April 2020.

As expected, the Fed raised rates by another 75 basis points yesterday, its fourth straight jumbo hike and sixth increase this year. The aggressive move lifted the benchmark rate 3.75% to 4%, up from near zero in March.

With the US economy already struggling against the combined headwinds of higher prices and higher rates, the markets were hoping for some signal that the most extreme monetary tightening since the 1980s might begin to ease. The Fed's new policy statement seemed to deliver it, acknowledged "the lags" between rate hikes and their economic effects, and possibly hinting at a pause.

But in his post-meeting presser, Fed Chair Jerome Powell torpedoed any such hopes, declaring it is "very premature" to consider pausing, and that the peak rates would be "higher than previously expected." Bond yields and the dollar immediately surged on Powell's hawkish remarks while equities plummeted.

Extending yesterday's rise, benchmark 10-year Treasury yields pushed up to just under 4.2% today, close to their recent peak. Higher yields pressure gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

More damaging to gold, the dollar surged 1.4% against major rivals as traders begin pricing-in a fifth hike of 75 basis points for December and a peak rate of well-over 5%. Higher rates lift the buck by attracting Forex investment seeking higher yield, weighing on gold in turn by making it pricier in other currencies.

Against this backdrop, the October ISM services index dropped to the lowest level since the US lockdowns in 2020. Comprised of companies like restaurants, hotels, and retailers, the services sector accounts for roughly 70% of GDP. The ISM manufacturing index revealed similarly deteriorating conditions.

The other precious metals were also lower, with silver sliding 0.8% while platinum and palladium lost 2.8% each.

At the Comex close: December gold fell $19.10 to $1,630.90; December silver slid 16 cents to $19.43; January platinum dropped $26.80 to $924.10; and December palladium shed $52 to $1,798.10 an ounce.