Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 2.5% to close under $1,864 as the dollar and Treasury yields climbed ahead of tomorrow's Fed meeting on monetary policy. It was the metal's biggest one-day drop in two months and its lowest finish in three months.

The Federal Reserve is widely expected to take aggressive action against inflation when it meets this week. Fed funds futures traders place the likelihood of a half-point rate hike at 99% for this meeting, according to CME FedWatch, with the odds of subsequent half-point hikes coming in June and July at more than 88%.

In addition, the Fed is expected to announce aggressive cuts to its $9 trillion balance sheet, a process known as quantitative tightening, to reduce further the availability of easy money in the financial system and contain prices.

Benchmark 10-year Treasury yields pushed about 3% before pulling back slightly on the prospect of higher rates and tighter money, pressuring gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The dollar jumped 0.7%, hovering around a 20-year high against major rivals, as Forex traders speculated that the Fed will be far more aggressive in raising rates than its global peers. Higher rates lift the buck by attracting investors seeking higher yield, pressuring gold and other commodities in turn by making the pricier in other currencies.

The other precious metals were also lower, with silver dropping 2.2% while platinum and palladium slid 0.7% and 3.9%, respectively.

At the Comex close: June gold lost $27.70 to $1,863.60; May silver dropped 59 cents to $22.54; July platinum slipped $6.80 to $932.80; and June palladium fell $91 to $2,216 an ounce.