Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 0.7% to close at $1,866.10 and posted weekly and quarterly declines as stubborn headline inflation continued to drive expectations that the Fed will keep interest rates higher for longer.

The metal lost 4.1% for the week and 3.3% for the quarter, under pressure from sharply higher Treasury yields and a rally in the dollar.

The Personal Consumption Expenditures index showed the cost of goods and services jumped 0.4% in August, the biggest monthly rise in seven months, pushing the annual rate to 3.5% from 3.4% in July.

However, almost all the PCE increase came from higher gasoline prices. The core rate, less food and energy, rose a meager 0.1% for the month. And the annual core rate fell from 4.3% to just 3.9%, the lowest level in two years.

New York Fed president John Williams said that although inflation is coming down, the Fed "still has a ways to go to fully restore price stability." An influential member of the FOMC, Williams added that interest rates might be "at or near the peak level" but the central bank "will need to maintain a restrictive stance" for some time.

Benchmark 10-year Treasury yields declined slightly on the slowing annualized core inflation but remained above 4.5%, near the highest level in 16 years, on the Fed's hawkish stance. Higher yields have weighed heavily on gold this quarter by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Tracking with yields, the dollar backed off its 10-month high but still scored its strongest quarter in a year, rising nearly 3%. A stronger dollar pressures gold by making it pricier overseas.

Adding to gold's session headwinds, WTI crude dropped another 1% to under $91 per barrel on worries that an overly aggressive Fed may hamper demand. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The other precious metals were mixed for the day, week, and quarter. Silver dropped 1.3% today, 5.8% this week, and 2.5% this quarter. Platinum edged up 0.1% for the day and 0.3% for the quarter but slid 1.9% for the week. Palladium was down 1.8% today, flat this week, and up 2.8% this quarter.

At the Comex close: December gold fell $12.50 to $1,866.10; December silver slid 29 cents to $22.45; January platinum add 80 cents, to $915.90; and December palladium fell $22.50 to $1,256 an ounce.