Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold edged up 0.1% to close just under $1,321 as the dollar fell on reports that Japan may provide less monetary stimulus than expected. The metal's gains were capped by uncertainty over the direction of U.S. interest rates as the FOMC meets today.

A Nikkei report released over the weekend indicates a smaller-than-expected package of monetary easing is likely from the Bank of Japan when it meets on Friday. The news drove the yen as much as 1.4% higher against the dollar for its biggest one-day rise since the Brexit vote in late June.

Pushed lower by the surging yen, the dollar lost as much as 0.3% against major rivals before rebounding slightly on reports that U.S. consumer confidence is steady in July despite worries about Brexit. A falling dollar supports gold and other commodities by making them less expensive to overseas buyers.

Traders anxiously await tomorrow's conclusion of the Fed's two-day policy meeting for any hints about the direction of interest rates. While a hike is extremely unlikely this month, upbeat recent data have bolstered the possibility of a quarter-point increase by year's end, with CME FedWatch projecting better than 50% probability for December.

However, some prominent Fed members have tempered those expectations because of persistently low inflation. San Francisco Fed President John Williams said today that inflation closer to the target 2% is needed, well above the current rate of 1.6%, and New York Fed President William Dudley recently made a similar statement.

Marketwatch reports that Sprott Asset Management projects a major production shortage in gold that will support higher prices for the metal in coming years. According to Sprott's research, gold discoveries have collapsed since peaking in 2007, despite a 250% increase in exploration budgets. Given the multi-year lag between discovery and "first gold pour," production probably peaked last year.

The other precious metals also gained, with silver picking up 0.2% while platinum and palladium rose 1% and 0.6%, respectively.

At the Comex close: August gold added $1.30, to $1,320.80; September silver picked up 4 cents to $19.68; October platinum gained $10.60 to $1,099; and September palladium rose $4.05 to $692.80 an ounce.