Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold surged 1.7% to close above $1,793 after unexpectedly dovish policy statements from the Federal Reserve and Bank of England pressured yields and boosted alternative assets.

At the close of its two-day meeting yesterday, the Fed announced it will taper monetary easing by $15 billion in November and December, laying the groundwork to end emergency stimulus by mid-2022. The news came as no surprise as the central bank had been preparing the markets for tapering since June.

What did surprise was the Fed's generally dovish tone. Fed Chairman Jerome Powell reassured the markets that inflation is still expected to be transitory and should recede by next summer. In the meantime, Powell emphasized that interest rates will remain near-zero until the economy returns to full employment.

Futures traders expecting more aggressive tightening were forced to cover their shorts, helping to bid up gold. At the same time, the Fed's relaxed approach to inflation prompted other investors to seek hedges like gold in case inflation proves more stubborn than Powell expects.

Separately, the Bank of England defied expectations by keeping interest rates unchanged after currency markets had already priced-in a rate hike. With UK inflation near 3% forecast to hit 5% by the spring, the BoE echoed the Fed by dismissing it as transitory.

Benchmark 10-year Treasury yields tumbled to 1.52%, pulled lower by the dovish outlook of both central banks. Falling yields support gold by reducing the opportunity cost for holding it instead of bonds as a safe-haven asset. Rising physical demand because of the Diwali festival in India also supported bullion.

The other precious were also higher, with silver jumping 2.9% while platinum and palladium added 0.7% and 0.5%, respectively.

At the Comex close: December gold surged $29.60 to $1,793.50; December silver rose 68 cents to $23.91; January platinum picked up $6.80 to $1,029.30; and December palladium added $9.20, to $1,996.40 an ounce.