Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.2% to close near $1,247 as a higher CPI boosted demand for alternative stores of value and bargain-hunters entered the market after yesterday's 0.9% slide.

The Consumer Price Index climbed to a six-year high of 2.9% in June, signaling an economy that is beginning to run hot. The more closely watched core CPI, stripping out volatile food and energy prices, edged up to an annualized 2.3%. Wage growth did not keep up, rising 0.1% in June but remaining flat for the past 12 months.

The dollar traded most flat, waffling between minor losses and gains, as traders viewed the inflation report as a mixed message about future rate hikes. Rising inflation with stagnant wage-growth remains a puzzle for the Fed, which has elected to let inflation climb above its 2% target before aggressively raising rates in the hope that incomes will catch up.

Higher inflation with slower rate hikes support gold by suppressing real interest rates, or rates above inflation. Low or negative real rates reduce the opportunity cost of holding assets without a yield, and encourage investors to seek alternative stores of value like gold.

Gold's gains were contained by sharply higher stocks as the Dow and S&P 500 both picked up 0.9% while the Nasdaq jumped 1.3%.

The other precious metals were also higher, with silver gaining 1% while platinum and palladium added 1.4% and 1.3%, respectively.

At the Comex close: August gold rose $2.20 to $1,246.60; September silver added 16 cents, to $15.98; October platinum gained $11.40 to $846.40; and September palladium picked up $11.80 to $948.80 an ounce.