Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold dipped 0.1% to close at $1,868.80 ahead of the Fed's latest rate hike as investors braced for tighter monetary policy. The metal then surged 1% to more than $1,889 in electronic trading after the central bank's actions were less hawkish than feared.

As widely expected, the FOMC raised interest rates by 50 basis points at the end of its two-day meeting, the second rate hike this year and the biggest since 2000. The Fed also said it will begin quantitative tightening of $47.5 billion per month, climbing to $95 billion in September, as it begins to unwind its $9 trillion balance sheet.

Traders were concerned that the Fed could surprise the markets with a steeper rate increase, perhaps of 75 basis points, today or in coming months, and jump right in with selling $95 billion in bonds per month.

Fed Chair Jerome Powell assuaged those fears in his post-meeting presser, saying definitively that central bank officials are not "actively" considering bigger hikes at upcoming policy meetings. He reaffirmed his goal of engineering a "soft landing" for the economy by avoiding overly-aggressive tightening.

Wall Street rejoiced at the relatively dovish message, with all three major US indexes jumping more than 2.8%. The gains came despite weak US jobs data after ADP reported private payrolls rose by just 247,000 jobs in April, far fewer than forecast.

Benchmark 10-year Treasury yields fell sharply after Powell's comments, lifting gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset. The dollar also pulled back, losing 0.8% against major rivals and lifting gold by making it less expensive in other currencies.

Crude oil jumped 5.25% after the EU proposed a plan to cease purchases of Russian oil products by the end of the year. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The other precious metals were mixed. Silver fell 1.1% before the Fed announcement, only to rebound 2.7% to $23 in after-hours trade. Platinum rose 2.2% and then tacked on another 0.5%. Palladium dipped 0.1% before rising 0.6% after closing.

At the Comex close: June gold dipped $1,80 to $1868.80; July silver fell 26 cents to $22.40; July platinum rose $21 to $979.60; and June palladium slipped $2.30 to $2,236 an ounce.