Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold surged 1.6% to close at a four-month high above $1,867 as softer data in China and the US pressured stocks and the dollar, driving investors into alternative stores of value. The metal pushed above its 200-day moving, a bullish move following two straight weeks of rising weekly prices.

China's factory output slowed in April and retail sales rose much less than forecast, suggesting the recovery in the world's second-largest economy may be leveling off after an initial surge. At the same time, supply bottlenecks and sharply higher raw materials has driven China's factory inflation to the highest level in since late 2017.

Here at home, recent weakness in economic data has put a check on optimism that the recovery will be go smoothly. Job gains in April fell abysmally short of forecasts while retail sales floundered without another transfusion of fiscal stimulus. The Empire State manufacturing index slipped from the March high.

Meanwhile, US consumer inflation has risen by the most since 2009 and annualized wholesale inflation is the highest since 2008. All three major US stock indexes rolled back, with the Dow and S&P 500 falling 0.2% while the Nasdaq lost 0.4%.

A growing chorus of Fed officials insist, however, that the inflation spike is transitory and will have no effect on monetary policy. Atlanta Fed President Earl Bostic and Fed Vice Chair Richard Clarida stated separately today that the economy is nowhere near benchmarks that would prompt a reduction in quantitative easing or rate tightening.

Bond investors are getting the message, with benchmark 10-year Treasury yields remaining little changed around 1.65% as prematurely higher interest rates are no longer being aggressively priced into the market. Speculation among bond traders that inflation would force the Fed to break its pledge to keep rates near zero through 2023 drove yields higher–and gold lower–in March and April.

Flat yields and rising inflation are a bullish combination for gold, spurring safe-haven demand without the impediment of rising opportunity cost for holding a non-yielding asset instead of bonds.

The dollar dipped around 0.2% against major rivals, supporting gold and other commodities priced in it for global trade by making them less expensive in other currencies.

The other precious metals were also higher, with silver and platinum jumping 3.3% and 1.8%, respectively, while palladium edged up 0.1%.

At the Comex close: June gold surged $29.50 to $1,867.60; July silver jumped 91 cents to $28.27; July platinum climbed $21.70 to $1,244.50; June palladium licked up $1.30 to $2,895.90 an ounce.