Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold dropped 1.5% to close under $1,773, the lowest level since last June, as strong US economic data and stimulus optimism boosted the dollar, dulling demand for alternative stores of value. If was the metal's fourth straight losing session.

US retail sales jumped more than 5% in January, the largest increase in seven months, as many Americans received $600 checks from a $900 billion stimulus package passed by Congress late last year. Sales were strong in every category, especially bars and restaurants.

Separately, manufacturing rose 1% in January after picking up 0.9% in December. The ninth consecutive monthly increase signaled solid momentum in this forward-looking sector.

With the Biden administration's new $1.9 trillion stimulus package on track to be signed into law by mid-March, optimism about the recovery is growing. The Atlanta Fed's first-quarter growth estimate is now 9.5%, up from just 4.5% one week ago.

The dollar jumped 0.5% against major rivals on speculation that the US economy will outpace Europe and much of Asia over the next six months. A rising dollar weighs on gold and other commodities by making them more expensive in other currencies, reducing overseas demand.

The Fed's minutes from its latest meeting, released today, showed the central bankers discussing the need to "stay vigilant" about possible stress in the financial markets because of high asset prices. They also noted that inflation is likely to jump briefly as the economy regains its footing, but not enough to require monetary tightening.

As if on cue, the BLS reported wholesale inflation rose 1.3% in January for its biggest surged since 2009. Most of the rise was attributed to energy costs and healthcare.

Gold has fallen sharply in recent sessions, with its 50-day moving average falling below its 200-day moving average, as inflation expectations have driven Treasury yields sharply higher.

Rising yields are a short-term headwind for gold because they increase the opportunity cost for holding it instead of bonds. In the longer term, however, rising inflation is typically supportive of higher gold prices as investors seek alternative stores of value.

The other precious metals were also lower, with silver dipping a penny while platinum and palladium fell 1.7% and 0.8%, respectively.

At the Comex close: April gold dropped $26.20 to $1,772.80; March silver dipped one cent to $27.32; April platinum lost $21.90 to $1,257.70; and March palladium lost $18.50 to $2,369.70 an ounce.