Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold edged down less than 0.1% to close under $1,718 as the dollar rose after Russia cut gas flows to Europe and the IMF warned of a global slowdown.

Russia’s Gazprom announced it will cut deliveries of natural gas to Europe by half, pushing the region to the brink of an energy crisis. The EU approved voluntary usage reductions of 15% to save gas before winter, when officials fear Russia will cut all flows as punishment for Western sanctions over its war on Ukraine.

The International Monetary Fund is forecasting a severe global downturn, slashing its growth projections for 2022 to just 3.2%, down from 6.1% in 2021. Projections for 2023 are even worse at 2.9%. If Russia shuts off gas flows to the EU, the IMF warned, global growth could tumble to 2% for just the fifth time since the 1970s.

The dollar rallied 0.6% against major rivals, especially the euro, as traders sought the perceived safety of the US currency. A stronger dollar weighs on gold and other commodities by making the pricier overseas.

Adding to safe-haven inflows, US consumer confidence fell for the third straight month in June on concerns about the elevated risks of recession. Separately, new home sale tumbled 8.1% to the lowest level since the depth of the pandemic in April 2020.

Backstopping gold’s losses, benchmark 10-year Treasury yields slid back to 3% as investors shed risk. Lower yields support gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Gold traders were largely on pause ahead of tomorrow’s conclusion of the Fed’s meeting on monetary policy. A rate hike of 75 basis points is essentially priced in already. But Fed fund futures show a 25% likelihood of a full 1% rate hike, which would further pressure gold by lifting yields and the dollar.

The other precious metals were mixed, with silver and palladium adding 1.1% and 0.4%, respectively, while platinum slid 0.6%.

At the Comex close: August gold dipped $1.40 to $1,717.70; September silver rose 21 cents to $18.54; October platinum slid $4.90 to $864.40; and September palladium picked up $8.20 to $2,011.20 an ounce.