Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold slid 0.5%, closing at a two-month low under $1,141, as Wednesday's hawkish Fed statement on monetary policy continued to weaken sentiment. Despite falling 1.8% this week on the renewed possibility of a December rate hike, the metal finished 2.4% higher for the month.

After its two-day meeting this week, the Federal Reserve signaled that December remains a distinct possibility for the first hike in interest rates since 2006. The news came as a surprise to most traders, who had heavily discounted the likelihood of an increase this year because of softer U.S. economic data and the promise of deeper monetary easing by other central banks.

Another wave of disappointing data was released today. Consumer spending rose in September by 0.1%, the smallest amount in eight months, according to the Commerce Department, raising questions about domestic demand. And consumer inflation as measured by the core PCE index, a favored Fed gauge, came in at just 1.3% year-over-year, well below the Fed's target 2%. This data comes one day after GDP in Q3 came in weaker than expected at just 1.5%.

Higher U.S. interest rates tend to damp demand for gold by strengthening the dollar, making dollar-denominated commodities more expensive overseas. Higher rates also boost the opportunity cost for holding assets like gold that offer no yield. But as long as real interest rates remain negative (below the rate of inflation), which they will for the foreseeable future, gold remains attractive as a hedge against future inflation, something few yield-based assets can say.

The other precious metals were mixed on the day but higher for the month. Silver dipped 0.1% to finish with a gain of 7.2% for its best month since January. Platinum dropped 0.4% but gained 8.8% this month. Palladium added 1% today and 4% this month.

At the Comex close: December gold slid $5.90 to $1,141.40; December silver dropped nearly 2 cents to $15.57; January platinum lost $4.20 to $989.10; and December palladium gained $6.45 to $677.25 an ounce.