Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold dropped 1.3% to close above $1,286 as rising import prices boosted the dollar, eroding demand for alternative stores of value. The metal was also pressured by reports that President Trump is seriously considering economist John Taylor, a policy hawk, for the new Chair of the Federal Reserve.

US import and export prices rose in September, the Bureau of Labor Statistics reports today, building expectations that higher consumer inflation may be in the pipeline. Imports prices increased 0.7% for the biggest gain in 15 months, while export prices were 0.8% higher. Both rises were largely driven by increased fuel costs.

The dollar gained 0.3% against major rivals as traders speculated that higher trade costs will encourage a rate hike from the Fed in December. CME FedWatch, which tracks the odds of rate increases according to Fed fund futures trading, raised the likelihood to 92%, up from 88% yesterday. Higher rates support the dollar by attracting foreign exchange investment seeking higher yield, weighing on gold and other commodities by making them more expensive in other currencies.

Gold was further pressured by a report from Bloomberg that President Trump is now favoring Stanford's John Taylor to replace Fed Chair Janet Yellen in January. Author of the famous Taylor Rule, which mechanically calculates interest rates according to twin goals of inflation and employment, Taylor would almost certainly push for tighter policy. According to his equation, rates should already be nearly three times the current 1.25%.

The other precious metals were also lower. Silver lost 1.9% while platinum and palladium slid 0.8% and less than 0.1%, respectively.

At the Comex close: December gold dropped $16.80 to $1,286.20; December silver lost 33 cents to $17.04; January platinum slid $7.30 to $934.80; and December palladium dipped 35 cents to $975.95 an ounce.