Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.2% to close at a four-week low under $1,330 as oil plunged, the dollar perked up, and traders cut positions in advance of Fed Chair Janet Yellen's speech on monetary policy on Friday.

The dollar gained marginally, adding around 0.2% against major rivals, as currency traders remained cautious about the direction of U.S. interest rates. A stronger dollar pressures gold by making it more expensive to foreign buyers.

Oil tumbled around 3% for a second day after the EIA reported U.S. stockpiles rose by an unexpected 2.5 million barrels last week, adding to concern about a global supply glut. Gold often trades in tandem with oil as a proxy for energy-related inflation.

But the biggest driver of gold's drop today is growing sentiment that Yellen may signal an inclination to raise interest rates when she speaks on Friday at the annual Jackson Hole meeting of global central bankers. Allies of the Fed Chair on the FOMC have gone out of their way over the past week to signal that a September hike is on the table, citing stronger data and the risks of waiting too long.

While the Fed fund futures market minimizes the likelihood, with the CME FedWatch calculator registering merely 18% chance for September, gold futures traders appear to be taking the possibility more seriously. Consensus still looks to December for the next rate increase, but hawkish remarks from Yellen could change that calculus.

Perhaps tempering any inclination to tighten policy soon, data released today by the CBP World Trade Monitor shows the world economy is still remarkably weak. Global trade fell 0.8% in Q2 and after a flat Q1, hampered by low growth and anemic demand. The IMF, World Bank, and OECD all have recently cut their global growth forecasts in part because of sputtering trade.

The other precious metals fell harder than gold, with silver dropping 2% while platinum and palladium lost 2.6% and 2.5%, respectively.

At the Comex close: December gold fell $16.40 to $1,329.70; December lost 38 cents to $18.69; October platinum dropped $29.10 to $1,082.20; September palladium shed $17.35 to $682.50 an ounce.