Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold dropped 0.6% to close under $1,807 as renewed expectations for aggressive rate hikes from the Fed weighed on demand despite another round of soft US economic data. The metal fell 2.2% for the month and 7.5% for the quarter.

The Fed’s preferred gauge of inflation, the PCE index, held steady at 6.3% over the past year, suggesting that inflation may have peaked but is not necessarily getting better.

At the annual ECB conference in Portugal this week, Fed Chair Jerome Powell vowed to lower inflation at virtually any cost, even if it means crushing economic growth and inflicting “some pain” on American families. Powell was met in this hawkish stance by ECB chief Christine Lagarde, who warned that the pre-pandemic era of low interest rates will not return.

The higher rate view has lifted the dollar by 6% this year to a 20-year high, pressuring gold and other commodities priced in it for global trade by making them more expensive in other currencies.

But the promise of tighter monetary policy to fight inflation comes against a background of already-weakening economic growth and the increasing risk of recession.

The government reported today that consumer spending grew only 0.2% in May, the smallest rise this year, as Americans change buying habits because of rising prices and eroding household income. Consumer spending accounts for 70% of US GDP.

Near-future spending looks to weaken further. As the Conference Board reported this week, consumer confidence fell to a 16-month low in June.

The Atlanta Fed lowered its forecast for Q2 real growth from 1% to negative 1.5% following the consumer spending data.

Gold remains in a kind of tug-of-war, strengthened by global demand for safe-havens and inflation hedges on one side, but weakened on the other side by a dollar lifted to 20-year highs by the Fed’s hawkish rate view.

The other precious metals were also lower. Silver lost 1.9% today for drop 6.2% for the month and 19% for the quarter. Platinum fell 1.6% for a monthly decline of 7.5%. Palladium shed 1.6% today and 4.5% in June.

At the Comex close: August gold futures fell $10.20 to $1,807.30; September silver slid 39 cents to $20.35; October platinum dropped $14.60 to to $895.30; and September palladium shed $30.50 to $1,916.10 an ounce.