Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold dropped 0.6% to close at an eight-week low near $1,310 as a rise in consumer inflation boosted the dollar, curbing demand for alternative stores of value. The metal ended the week down 1.8%.

The Consumer Price Index rose 0.2% in August, more than forecast, behind rapidly escalating rents and healthcare costs. Excluding food and energy, which fell during the month, the so-called core CPI gained a little more at 0.3%.

Given yesterday's PPI report, which showed flat wholesale inflation in August, the near-term trend for consumer inflation remains murky. The Fed's preferred gauge, the so-called core Personal Consumption Expenditures index, is projected at 1.7% year-over-year, still well-under the 2% target.

The dollar jumped nearly 0.8% on the CPI report, pressuring gold and most commodities, as traders speculated that the Fed may be more confident about raising interest rates later this year. While September is almost certainly off the table, the odds of a hike December rose from 50% to 55%, according to CME FedWatch. The buck was also boosted by expectations that the Bank of Japan will ease further, weakening the yen. Both the Fed and BOJ meet next week.

The other precious metals were mixed for the day but lower for the week. Silver fell 0.9% for a weekly loss of 2.6%. Platinum dropped 1.6% on the day and 4.7% on the week. Palladium gained 2.4% but still ended the week 1% lower.

At the Comex close: December gold fell $7.80 to $1,310.20; December silver dropped fell by 18 cents to $18.86; October platinum lost $16.20 to $1,017.60; and December palladium gained $15.80 to $672.40 an ounce.