Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold recouped nearly 1% for its biggest one-day jump in almost a month, closing just under $1,078 as traders weighed the minutes from October's Fed meeting and the dollar receded, boosting demand for alternative assets.

The Federal Reserve signaled its intention to move slowly and cautiously with higher rates even if it decides to tighten in December, according to the minutes released yesterday. While the majority of committee members are comfortable with the prospect of a small December hike, they emphasized that the subsequent trajectory of rates will be "shallow," keeping rates low for a long time to come.

Speaking today in Atlanta, regional Fed President Dennis Lockhart underscored the caution, saying the pace of future hikes may be "slow and possibly more halting than historic episodes of rising rates" because "serious concerns" remain about the global economic outlook.

The dollar rolled back 0.6% against major rivals, suggesting that a December hike had already been priced into the greenback. The BOJ's decision to hold interest rates steady also weighed on the U.S. currency.

Gold responded with gains not simply because the lower dollar makes it less expensive to overseas buyers, but also because the prospect of a long, shallow tightening cycle implies real rates (that is, rates below the level of inflation) will remain negative for the foreseeable future. Negative real rates are bullish for gold because they mean most yield-bearing assets cannot keep pace with inflation, whereas gold traditionally thrives in high-inflation environments.

The other precious metals were also higher, with silver adding 1% while platinum and palladium gained 1.2% and 1.7%, respectively.

At the Comex close: December gold gained $9.20 to $1,077.90; December silver added 14 cents, to $14.22 an ounce. January platinum rose $10.10 to $858.10; and December palladium jumped $8.95 to $541 an ounce.