Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinRising for a sixth session, gold gained 0.4% to close above $1,802 on safe-haven demand ahead of the release of the Fed's minutes from its June meeting. The metal then extended its climb in electronic trade after the Fed signaled no immediate plans to reduce monetary stimulus, pushing over $1,810 before receding to $1,804.

In its closely scrutinized minutes, the Fed committee was surprised by the sharp rise in inflation over the past few months. But the committee was also insistent that the burst is transitory, and the annual rate of inflation will fall back from 3.9% today toward 2% next year.

While several officials saw enough in the recovery to suggest that the Fed's $120 billion-per-month asset purchases could begin to taper sometime this year, no indications were forthcoming about or whether it might happen. Importantly, the major felt that "substantial further progress" toward its target for the economy has not been met.

The markets had been bracing for a far more hawkish tone to the meeting. The relatively dovish minutes prompted another sharp rally in Treasury prices, knocking benchmark 10-year yields under 1.3%, their lowest more than four months.

Other sovereign bonds also rallied on flights to safety, with British gilt yields dropping to a similar level and German bund yields falling to negative 0.3%.

Falling bond yields support gold by reducing the opportunity cost for holding the metal instead of bonds as a safe-haven asset.

The other precious metals were mixed before and higher after the Fed minutes. Silver went from down 0.2% to up 0.3%. Platinum dropped 0.2% but pushed back to a slight gain after hours. Palladium rose 1.9% and then pushed up to 2.1%.

At the Comex close: August gold added $8, to $1,802.10; September dropped a nickel to $26.13; October platinum dipped $2.10 to $1,081.90; and September palladium rallied $52.20 to $2,848.30 an ounce.