Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold dropped 1.3% to close under $1,993 after a hotter-than-expected CPI report shifted the outlook for a Fed policy pivot, boosting yields and the dollar while undercutting alternative assets. It was the metal’s lowest finish in two months.

The consumer price index advanced 0.3% last month, more than the 0.2% forecast, behind surges in rental housing and healthcare costs. The annual inflation rate fell to 3.1%, down from 3.4% in December. The core CPI, minus food and energy, picked up 0.4% for an annual rise of 3.9%, matching December.

Following strong January job gains and solid year-end GDP, the elevated inflation data shows a resilient economy that perhaps needs to cool a little more before the Fed feels comfortable pivoting to lower interest rates.

According to CME FedWatch, the odds of May for the first cut have fallen below 35%, while June has risen to more than 76%.

Benchmark 10-year Treasury yields jumped to the highest level since late November, more than 4.3%, on the shifting rate view. Higher yields pressure gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Tracking higher with yields, the dollar rose 0.7% to a three-month high. A stronger buck weighs on gold and other commodities by making them more expensive in other currencies, reducing overseas demand.

The other precious metals fell even harder, with silver losing 2.7% while platinum and palladium shed 2% and 4%, respectively.

At the New York spot close: gold fell $25.30 to $1,992.90; silver slid 61 cents to $22.15; platinum shed $18.20 to $878.90; and palladium plunged $36.10 to $860.50 an ounce.