Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold rose 0.1% to close above $1,794 as higher inflation expectations and rising oil prices stoked demand for inflation hedges despite a stronger dollar.

The New York Fed reported one-year and three-year consumer inflation expectations increased for the tenth straight month in August. Consumers now expect prices to rise 5.2% over the next year and 4% over the next three years. Both figures are the highest since the Fed survey was launched in 2013.

With inflation in mind, more Fed members have joined the choir to reduce the bond-buying program known as quantitative easing later this year. The August Consumer Price Index report, due out tomorrow, should give further clues to whether a taper will be announced at the September Fed meeting.

Since the pandemic began, the US central bank has been far more interested in healing the labor market than curtailing inflation, which it has largely dismissed as a temporary result of societal re-openings and supply-chain blockages. The surprisingly weak payrolls report for August, which showed merely 235,000 new jobs added, may encourage the Fed to delay the taper until more jobs data are available.

Separately, a key measure of inflation expectations in the eurozone rose to the highest level in six years. The ECB announced last week that it will begin to slow asset purchases through one of its quantitative easing mechanisms, the so-called Pandemic Emergency Purchase Program, or PEPP.

Benchmark 10-year Treasury yield edged lower as bond traders weighed the likelihood of an imminent taper against the softening labor market and spread of the Delta variant against. Lower yields support gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Also supporting gold, crude prices rose above $70 per barrel for the first time in six weeks on supply concerns because of Hurricane Ida. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The dollar edged higher on the US inflation expectations, limiting gold's gains by making it more expensive in other currencies.

The other precious metals were mixed, with platinum adding 0.1% while silver and palladium slipped 0.4% and 2.2%, respectively.

At the Comex close: December gold gained $2.30 to $1,794.40; December silver dropped a dime to $23.80; October platinum picked up $1 to $957.50; and December palladium fell $46.50 to $2,079.80 an ounce.