Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slipped 0.8% to close under $1,745 after sharply higher wholesale inflation lifted bond yields and the dollar, undercutting demand for alternative stores of value. The metal still gained 1% for the week, lifted by dovish Fed minutes released on Wednesday.

US producer prices surged 1% in March to post a 12-month rise of 4.2%, the most since September 2011, as energy costs jumped and supply chains remained strained by the pandemic. The so-called core PPI, stripping out volatile food and energy prices, rose a more modest 0.6% for the month and 3.1% year-on-year.

Treasury yields jumped, too, with benchmark 10-year yields pushing back up to 1.66% as investors reacted to the threat of sharply higher inflation. Bond traders typically sell long-dated securities in highly inflationary environments, demanding higher yields for tying up cash that may erode in value.

Higher bond yields create a headwind for gold in the short term by increasing the opportunity cost for holding it instead on bonds as a safe-haven asset. But rising inflation expectations, which have been a main driver behind the recent bond selloff, are also bullish for gold in the longer term in its traditional role as an inflation hedge.

The Fed reinforced its commitment to extreme easy-money policies in minutes from the latest FOMC meeting, released this week. Interest rates are forecast remain to unchanged through 2023, and $120 billion per month in quantitative easing will continue for an unlimited period. This highly accommodative stance is bullish for gold because it pressures the dollar and keeps real interest rates negative.

The dollar tracked higher with yields, adding 0.1% against major rivals. A stronger buck pressures gold and other commodities by making them more expensive in other currencies, driving down overseas demand.

The other precious metals were mixed for the day and week. Silver lost 1% today but rose 1.3% this week. Platinum fell 2.1% but eked out a weekly rise of 0.1%. Palladium added 0.3% but still lost 0.7% this week.

June gold slipped $13.40 to $1,744.80; May silver lost 26 cents to $25.33; July platinum dropped $26.10 to $1,209.30; and June palladium added $7.70, to $2,636 an ounce.