Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1.3% to close under $1,635 after hawkish Fed comments and scorching UK inflation rallied yields and the dollar, undermining alternative stores of value. It was the metal's lowest finish in more than three weeks.

Consumer inflation in Britain rose to 10.1% in September, returning to a 40-year high, as food prices soared by 14.5%. Excluding volatile food and energy costs, core inflation pushed up to 6.5%, signaling the spread of pricing pressure to the broader economy.

Yields on UK gilts, the equivalent of US Treasurys, rose on expectations that the Bank of England will have to continue raising interest rates to combat inflation despite the dour outlook for Britain's economy.

Tracking higher with gilts, US Treasury yields climbed to a 14-year high, with benchmark 10-year yields hitting 4.125%. Higher yields weigh on gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The dollar rose 0.7% as US investors also gird for higher US interest rates. Minneapolis Fed president Neal Kashkari said yesterday that the Fed may need to push its benchmark rate above 5% unless "actual progress in core inflation" becomes evident. Core inflation jumped to a 12-month peak of 6.6% last month.

Higher interest rates lift the dollar by attracting Forex investors seeking higher returns. A stronger dollar pressures gold and other commodities by making them more expensive in other currencies, thereby curtailing overseas demand.

The other precious metals were also lower, with silver sliding 1.3% while platinum lost 2.9% and palladium dipped 0.9%.

At the Comex close: December gold lost $21.60 to $1,634.20; December silver slid 24 cents to $18.36; January platinum dropped $26.20 to $881.10; and December palladium shed $18.40 to $1,995.50 an ounce.