Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1.6% to close under $1,750 as bond yields and equities rose after yesterday's announcement by the Federal Reserve that reductions in monetary easing may begin soon. Around half of gold's decline today came in after-hours trade yesterday.

The Fed struck a positive tone about the prospects for the labor market and economy in its post-meeting statement, paving the way for the tapering of its bond-buying program known as quantitative easing, perhaps as early as November.

In addition, half of the FOMC members are now expecting interest rates to rise sometime next year, whereas most had been targeting early 2023 in their last dot-plot.

Fed Chair Jerome Powell was careful to qualify this forward guidance, however, by underscoring risks to recovery like the spreading Delta variant and looming debt-ceiling battle in Congress. He also tied a November taper to continued strength in job-creation, something that faltered badly in the August nonfarm payrolls report, which showed merely 235,000 jobs added.

In the meantime, the Fed will continue to pump $120 billion per month into the economy, and interest rates will remain near-zero at least until mid-2022.

Risk appetite rose sharply in the wake of the Fed's guidance as investors were relieved that no real changes to monetary policy occurred. The Dow and S&P 500 jumped 1.5% and 1.2%, respectively, while the Nasdaq added 1%.

Benchmark 10-year Treasury yields pushed over 1.4% today after a muted response yesterday. But the so-called yield curve, which plots differences between short and long duration bonds, remained relatively flat. The flat curve suggests bond traders anticipate that drags on growth may prevent the Fed from raising interest rates as soon as it hopes.

Rising yields are a headwind for gold because they increase the opportunity cost for holding it instead of bonds as a safe-haven asset.

A spate of mediocre data did little to abate risk sentiment. First-time jobless claims rose to a one-month high last week. IHS Markit's reading of the US services sector fell to a 14-month low while its manufacturing print slid to a five-month low.

The other precious metals were also lower, with silver losing 1% while platinum and palladium slid 0.4% and 3.2%, respectively.

At the Comex close: December gold slid $29 to $1,749.80; December silver dropped 23 cents to $22.68; October platinum slipped $4.10 to $997; and December palladium lost $64.40 to $1,971.80 an ounce.