Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 0.7% to close under $1,935 as falling oil prices and rising expectations of aggressive monetary tightening from the Fed lifted the dollar, pressuring alternative stores of value. The metal ended the week down 2.1%, its first weekly decline this month.

Traders continued to digest Fed Chair Jerome Powell's statement yesterday that a 50-basis point rate hike will be "on the table" at the FOMC's May meeting. Powell's affirmation, coming after many other Fed officials have called for larger rate hikes in recent weeks, set the stage for even larger increases to follow as the central bank belatedly tries to contain 8.5% consumer inflation, the highest in 40 years.

Fed funds futures traders now see a 94% likelihood that the Fed will follow a half-point hike in May with one of 75 basis points in June, up from 28% one week ago. It would be the first increase of that size since November 1994.

Wall Street recoiled at the tighter rate view, with all three major US indexes dropping more than 2%. Higher rates pressure corporate profits by increasing the cost of capital.

The dollar rallied 0.6% against major rivals on rate speculation, weighing on gold and other commodities priced in it for global trade by making them pricier in other currencies, limiting overseas demand.

Gold was also pressured by falling oil prices. US benchmark WTI crude fell 2% for the day and 4% for the week as rising inflation and tighter interest rates are expected to curtail energy demand. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The other precious metals were lower for the day but mixed for the week. Silver fell 1.5% today and 5.6% this week. Platinum shed 4.2% for a weekly loss of 6.7%. Palladium dropped 1.8% for the day but still add 0.9% this week.

At the Comex close: June gold lost $13.90 to $1,934.30; May silver fell 36 cents to $24.26; July platinum dropped $40.40 to $927.40; and June palladium shed $43.90 to $2,376.30 an ounce.