Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slipped 0.3% to close near a 30-month low under $1,679 as Treasury yields and the dollar rose ahead of tomorrow's meeting of the Federal Open Market Committee, pressuring alternative stores of value.

At the conclusion of its two-day conference on monetary policy, the Fed is expected to implement another jumbo increase in interest rates to combat stubbornly high inflation. Fed funds futures traders forecast a 100% chance of at least a 75-basis-point hike, with a 20% chance that the central bank will deliver a hike of 1%, which would the biggest since the 1980s.

Benchmark 10-year Treasury yields edged up to an 11-year high near 3.5% on the hawkish rate view, while 2-year yields rose above 3.95%, pushing the spread between them to nearly negative 0.5%. This kind of yield-curve inversion often presages recession, occurring when the market expects sharply higher inflation in the near term and economic weakness in the longer term.

While gold is often considered a go-to asset for hedging against inflation, it is pressured by higher bond yields because they increase the opportunity cost for holding the non-yielding asset instead of bonds.

The dollar edged slightly higher against major rivals, tracking with yields. A stronger dollar weighs on gold and other commodities by making them pricier overseas.

The other precious metals were mixed, with silver dipping 0.1% while platinum and palladium climbed 1.9% and 5.1%, respectively.

At the Comex close: December gold slipped $5.30 to $1,678.20; December silver dipped 2 cents to $19.36; October platinum picked up $17.50 to $918.50; and December palladium jumped $108 to $2,220.70 an ounce.