Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold surged 1.2% to close at nearly a five-week above $1,875 after hotter-than-expected consumer inflation hammered, boosting demand safe havens and inflation hedges. The metal gained 1.3% for the week.

The Consumer Price Index jumped 1% in May after rising just 0.3% in April, pushing annualized inflation up to 8.6%, a new 40-year high. The surprisingly hot reading refuted the notion that peak inflation has been reach.

Separately, consumer sentiment sank to the lowest point since the mid-1980s, according to the University of Michigan gauge, as Americans’ expectations for future inflation jumped to the highest level since 2008, during the global financial crisis.

Wall Street tumbled on the data as investors shed risk in fear that the Federal Reserve will become even more aggressive in hiking interest rates. The Dow and S&P 500 shed 2.7% and 2.9%, respectively, while the tech-heavy Nasdaq dumped 3.5%. Tech and growth stocks are more sensitive to rising interest rates because their valuation rely heavily on future cash flows, which are reduced by high borrowing costs.

Benchmark 10-year Treasury yields rose above 3.16%, the highest in a month, while 2-year yields also jumped above 3% to the highest level in 15 years. Short-duration Treasury yields are considered the strongest indication of near-term interest rates changes.

The dollar rallied 1% as Forex traders speculated that the Fed will be more likely to raise rates by 75 basis points at one or more of next meetings. Higher rates lift the dollar by attracting investment seeking higher yield.

Ordinarily, strength in yields and the dollar would weigh on gold, the former by increasing the opportunity cost for holding it instead of bonds, the latter by making it pricier in other currencies. But the potent combination of plunging stocks and raging inflation rallied the metal on flights to safety anyway.

The other precious metals were mixed for the day and week. Silver rose 0.5% today and was virtually unchanged for the week. Platinum slipped 0.5% for a weekly decline of 4%. Palladium fell 0.4% today and 4.2% this week.

At the Comex close: August gold surged $25.70 to $1,875.50; July silver picked up 11 cents to $21.93; July platinum dropped $4.90 to $975.90; and September palladium shed $8.60 to $1,907 an ounce.