Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold inched up 30 cents to close at $1,752 as oil prices climbed to nearly a three-year high and several Fed members voiced concerns about the premature tapering of stimulus, lifting demand for alternative stores of value.

In its post-meeting statement last week, the Fed struck a positive tone about the prospects for the labor market, paving the way for the tapering of its bond-buying program known as quantitative easing, perhaps as early as November. Concerned about rising inflation, half of the committee also penciled in an initial rate hike for mid-2022, once QE has ended.

But several prominent central bankers are now pushing back against that hawkish narrative, signaling doubts about whether the economy has, indeed, reached the threshold for removing stimulus.

Fed governor Lael Brainard said today that US employment is still "short of the mark" for the Fed to begin tapering its $120 billion per month in bond purchases. Last month's slowdown in hiring could continue in the fall, she added, as the Delta variant pressures various parts of the economy.

Separately, Minneapolis Federal Reserve Bank President Neel Kashkari reinforced the message, emphasizing that the Fed's "highest priority" is getting Americans back to work, with inflation a secondary concern.

Meanwhile, John Williams of the New York Fed and Charles Evans of the Chicago Fed all but dismissed the inflation worries voiced by the hawkish members of the FOMC. Williams predicted today that inflation is likely to fall back around 2% next because of ongoing Covid disruptions. Evans went further, saying he's more worried about too little inflation than too much.

Benchmark 10-year Treasury yields jumped to a three-month high above 1.51% midday before pulling back under 1.49% as bond traders continued to digest conflicting Fed statements about the course of monetary policy.

Bond yields have risen on the taper prospects, creating headwinds for gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset. But additional comments from dovish Fed members have reclaimed some momentum for the metal, lifting it for two straight sessions.

Also supporting gold, WTI crude jumped 2% to $75.45 per barrel, nearly a three-year high, on dwindling domestic reserves and expectations of stronger demand. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

Gold gains were capped by stronger dollar, which rose 0.2% against major rivals behind rising Treasury yields. A rising dollar weighs on gold by making it more expensive in other currencies, stifling overseas demand.

The other precious metals were mostly higher, with silver and platinum rising 1.2% and 0.2%, respectively, while palladium slipped 0.2%.

At the Comex close: December gold added 30 cents, to $1,752; September silver climbed 27 cents to $22.69; October platinum picked up $1.70 to $981.60; and December palladium dipped $3.40 to $1,947.70 an ounce.