Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell another 0.5% to close under $2,026 after another round of upbeat US data and hawkish comments from Fed officials lifted yields and the dollar, undermining alternative assets.

The ISM barometer of business conditions in the service sector rose more than forecast to a four-month high in January, pushing above 53%, where anything above 50% means expansion. The services industry accounts for more than two-thirds of the economy.

Separately, the S&P Global services PMI accelerated for the fourth month, rising to a seven-month high.

Following Friday’s blowout nonfarm payrolls report showing 353,000 new jobs added last month, the strong data reinforces the view that the Fed will slow-walk rate cuts for a while longer.

Appearing on 60 Minutes, Fed Chair Powell dismissed the idea of a March rate cut, saying the Fed can be “prudent” about when to cut, given the strong economy. Minneapolis Fed President Neel Kashkari reinforced the message, asserting that the “resilient” economy likely means a higher neutral rate and little hurry to cut.

Chicago Fed President Austan Goolsbee pushed back a bit on the hawkish view, telling Bloomsberg TV that nothing needs to change to justify eventual rate cuts “if we just keep getting more data like we’ve gotten.” Goolsby is a noted policy dove.

Benchmark 10-year Treasury yields rose again on the data and Fed talk, pressuring gold by increasing the opportunity costs for holding it instead of bonds.

Tracking higher with yields, the dollar added 0.5%, rising to an 11-week high against major rivals on the shifting rate view. A rising buck weighs on gold and other commodities by making them pricier overseas.

Gold’s ability to hold above $2,000 despite sharply higher yields and the dollar is testimony to strong global demand. Aggressive central bank purchases are supporting the physical market, with annual net purchases of 1,037 metric tonnes in 2023, close to the all-time record set in 2022, according to the World Gold Council. And safe-haven inflows continue because of rising geopolitical tensions.

The other precious metals were mixed, with silver sliding 1.6% while platinum and palladium added 0.2% and 0.7%, respectively.

At the New York spot close: gold slipped $10.40 to $2,025.70; silver lost 37 cents to $22.42; platinum picked up $1.90 to $903.50; and palladium advanced $7.0 to $956.10 an ounce.