Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

AustinNew York spot gold surged 1.6% to close above $2,551, a new record high, after another round of soft inflation data reinforced the prospect of monetary easing by the Fed. Silver rallied 4.1% to finish at $29.74 an ounce.

Wholesale inflation as measured by the producer price index rose 0.2% in August, pulling the 12-month rate down to 1.7% from 2.1% in July. It was the lowest annual rate in six months. Wholesale inflation is typically a harbinger of future consumer inflation.

Coming one day after the CPI showed similar weakening, the data confirms a multi-month deflationary trend that correspondents to a gradual slowing in the labor market and overall economy�precisely what the Fed was hoping for when it raised interest rates to the highest level in more than 20 years.

Fed fund futures traders have fully priced in a quarter-point reduction when the central bank meets next week, with further cuts of at least as much in November and December. The odds that the Fed will cut by a full 1% by December have risen to 85%, according to CME FedWatch.

The dollar fell 0.4% against major rivals led by the euro, which rose after the ECB cut its rate by a quarter-point, but ECB chief Christine Lagarde pushed back on the idea of another cut in October. A weaker dollar boosts gold and other commodities by making them cheaper in other currencies.

Gold was also supported by sharply higher oil prices. US benchmark WTI crude added 2.7% to more than $69 per barrel after Hurricane Francine interrupted oil and gas production in the Gulf of Mexico. Gold often trades in sympathy with oil.

Platinum and palladium rose 2.7% and 4.3%, respectively, after Putin threatened to change export regulations to penalize the West for supporting Ukraine. Russia is a leading producer of PMGs.

At the New York spot close: gold surged $39.10 to $2,551.20; silver rose $1.18 to $29.74; platinum picked up $26 to $982.20; and palladium advanced $43.260 to $1,053.80 an ounce.