Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold dropped 0.9% to close under $1,773 after strong wholesale inflation strengthened expectations that the Fed will accelerate its reduction of monetary easing this week as a prelude to raising interest rates this spring.

The producer price index jumped another 0.8% in November, suggesting the strongest inflation in decades will not be going away soon. Wholesale prices have now surged 9.6% over the past 12 months, the most since the index was revamped in 2009.

Coming as the Federal Reserve commences its final two-day policy meeting of the year, the data increases the likelihood that the central bank will announce a faster pace to its taper of emergency easing, doubling the monthly reduction to $30 billion. The end of monetary easing is considered a prerequisite to rate hikes, the Fed's most effective tool for slowing inflation.

The dollar rose 0.3% against major rivals as Forex trader anticipate that the Fed will tighten monetary policy ahead of the other major central banks. Higher rates lift the buck by attracting investors seeking higher yield. A stronger dollar, in turn, pressures gold and other commodities by making them more expensive in other currencies.

Benchmark 10-year Treasury yields also rose on the Fed policy view, pushing back above $1.44%. Higher yields weigh on gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The other precious metals were also lower., with silver falling 1.8% while platinum and palladium lost 1.5% and 3.1%, respectively.

At the Comex close: February gold slid $16 to $1,77.30; March silver dropped 40 cents to $21.92; January platinum slipped $13.70 to $910.90; and March palladium shed $52 to $1,622.70 and ounce.