Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 0.8% to close under $1,339 as the dollar and bond yields continued to climb on higher inflation expectations, cutting into demand for alternative stores of value. The metal suffered a weekly deline of 0.7%, its first in three weeks.

Rising prices for raw materials and oil are pushing inflation expectations sharply higher. Yields on TIPS, or inflation-protected Treasury notes, rose to nearly 2.2% this week, the highest level in more than three years. Consumer prices heated up to an annualized rate of 2.4% in March, according to CPI data released early this month.

The dollar extended its rally to a two-week high, gaining 0.4% against major rivals as traders speculated that inflation will drive the Fed to raise interest rates more aggressively than previously thought. Yields on 10-year Treasurys pushed up near 3% for the same reason.

The buck was also boosted by a tumble in the pound after Bank of England governor Mark Carney said weak UK inflation data has lowered the likelihood of a rate hike next month.

While sharply higher inflation is ultimately bullish for gold's traditional role as inflation hedge, it can also pressure the metal in the short term by triggering faster rate hikes. Higher rates support the dollar by attracting foreign exchange investment seeking higher yield, weighing on commodities like gold that are priced in dollars for global trade by making them more expensive in other currencies.

The other precious metals were mixed for the day and week. Silver slipped 0.4% today but gained 3% this week. Platinum lost 0.9% on the day and 0.1% on the week. Palladium added 0.4% today for a weekly rise of 5%, driven by tensions between the US and Russia, the major producer of palladium.

At the Comex close: June gold dropped $10.50 to $1,338.30; May silver slid 8 cents to $17.16; July platinum dropped $8.30 to $931.80; and June palladium added $3.75, to $1,030.20 an ounce.