Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1.7% to close under $1,945, receding from a two-week high as a sharp rebound in the dollar and stronger stocks triggered profit-taking despite soft economic data.

The dollar jumped 0.6% against major rivals, extending yesterday's rise, as the euro tumbled after the ECB signaled a preference for a weaker currency. Philip Lane, chief economist for the ECB, said today the strength of the euro relative to the dollar would likely influence monetary policy decisions and growth forecasts for the region.

The dovish comments came after the euro rose to $1.20, the highest level since May 2018, following last week's announcement by the Fed that it will let inflation run well above 2% for extended periods before raising interest rates. It has since retraced all those gains against the dollar.

A rising dollar tends to pressure gold and other commodities that are priced in it for global trade by making them more expensive in other currencies.

The dollar's rebound after months of weakness prompted traders to take profits from gold's recent rise to a two-week high near $1,979, which was driven by expectations that the Fed will keep interest rates and bond yields lower for longer.

Low interest rates typically weaken the buck by making it less attractive to investors seeking yield, while low yield on Treasurys reduce the opportunity cost for holding gold, which offers no yield itself.

The Fed's Beige Book reported the economy softened in August behind continued uncertainty and volatility related to the coronavirus pandemic. Separately, private payrolls expanded by 428,000 jobs in August, less than half of forecasts, adding to worries that recovery in the labor market is stalling out.

Meanwhile, the non-partisan Congressional Budget Office said the government will run a budget shortfall of $3.3 trillion this year, the biggest ever, because of pandemic relief.

Ignoring the weak data, Wall Street rose into record territory as investors cheered the prospect of more fiscal stimulus from Congress. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi, architects of the first CARE act, have reportedly restarted talks on another relief package for small businesses and laid-off workers. The Dow and S&P 500 both added more than 1.5% while Nasdaq picked up 0.9%.

The other precious metals were also sharply lower, with silver falling 4.4% while platinum and palladium fell 5.1% and 1.9%, respectively.

At the Comex close: December gold lost $34.20 to $1,944.70; December silver fell $1.25 to $27.40; October platinum shed $48.60 to $904.10; and December dropped $43.60 to $2,267.50 an ounce.