Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold dropped 1.6% to close under $1,825 after strong wholesale inflation and slowing global growth lifted the dollar, pressuring alternative stores of value.

The Producer Price Index increased 0.5% in April for a 12-month rise of 11%, more than expected but below the 11.5% rate in March. The decrease was largely due to lower food and energy costs following sharp increases the previous month due to the Ukraine war.

The mild decrease in annualized wholesale inflation is not expected to derail the Fed from its aggressive program of monetary tightening. After increasing rates by 75 basis points over its past two meetings, the central bank has all but promised additional half-point hikes at its next two, possibly three, meetings.

High inflation, rising rates, the Ukraine war, and energy supply disruption are raising concerns about a global growth slowdown. The MSCI all-country world stocks index, considered a global benchmark, is down 20% in 2022. The S&P 500 is down 18% from its January high, flirting with a technical bear market.

The dollar resumed its rally, adding nearly 1% to reach a fresh 20-year high, on speculation that the Fed will tighten far faster than its major peers. Higher interest rates lift the dollar by attracting Forex investment seeking higher yield. A stronger dollar pressures gold in turn by making it more expensive in other currencies, reducing overseas demand.

A chorus of ECB officials are also advocating tighter monetary policy to combat surging inflation. But the Fed's forward guidance has been far more aggressive, ostensibly planning to lift rates to more than 2.5% this year while beginning to unwind its $9 trillion balance.

The other precious metals were also sharply lower, with silver losing 3.7% while platinum and palladium dumped 5.9% and 7.3%, respectively.

At the Comex close: June gold dropped $29.10 to $1,824.60; July silver slid 80 cents to $20.77; July platinum lost $58.40 to $931.40; and June palladium plunged $147.30 to $1,86.60 an ounce.