Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1.3% to close under $1,776 as Treasury yields surged on upbeat data and rising inflation expectations, undercutting demand for alternative stores of value.

US durable goods orders jumped 3.4% in January, the biggest rise in six months, suggesting the economy was picking up steam at the end of 2020 despite the resurgent pandemic. Much of the rise came from military expenditure on aircraft and other hardware.

Yields on benchmark 10-year Treasurys surged briefly above 1.6% today, the highest level in more than a year, as investors sold off longer-duration bonds in anticipation of higher inflation. The spike followed an anemic response to the Treasury Department's auction of 7-year notes.

Inflationary pressures have been building over the past month as the vaccine rollout accelerates and the economy shows signs of recovery. While consumer prices have risen just 1.4% from a year ago through January, wholesale and import prices are sharply higher, implying more inflation is in the pipeline.

While higher inflation is considered bullish for gold as a long-term store of value, rising bond yields create short-term pressure by increasing the opportunity cost for holding the metal, which offers no yield itself, instead of sovereign debt as a safe-haven asset.

The dollar bounced off a seven-week low after Treasury yields jumped, as traders speculated that rising inflation could prompt the Fed to raise interest rates sooner than expected. A rising dollar weighs on gold and other precious metals by making them more expensive in other currencies, limiting overseas demand.

The other precious metals were also lower, with silver sliding 0.9% while platinum and palladium dropped 2.1% and 0.7%, respectively.

At the Comex close: April gold dropped $22.50 to $1,775.40; May silver lost 24 cents to $27.69; April platinum fell $26.40 to $1,231.50; and June palladium slid $16.70 to $2,414.80 an ounce.