Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 0.6% to close under $1,959 after softer consumer inflation lifted yields and equities, undercutting alternative assets despite a falling dollar.

The consumer price index rose merely 0.1% in May, dropping the annual inflation rate from 4.9% to 4%, the lowest level since March 2021. But the so-called core rate, excluding volatile food and energy costs, climbed a more robust 0.4% for the third straight month, lowering the annual core rate just slightly, to 5.3% from 5.4% in April.

The better-than-expected headline print has convinced traders that the Fed will almost certainly stand pat when its two-day meeting on monetary policy concludes tomorrow. CME FedWatch puts the odds of a pause at 92%.

But the stickier core inflation suggests that the central bank's work is far from over. The odds of a quarter-point rate hike in July actually rose after the CPI release, according to Fed fund futures trading, to slightly more than 60%.

Still, Wall Street cheered the better inflation numbers, lifting the Dow and S&P 500 higher by 0.4% and 0.7%, respectively, while the tech-heavy Nasdaq climbed 0.8%. Tech stocks are more sensitive to rate hikes because their valuations are based on leveraged future earnings.

Benchmark 10-year Treasury yields stepped up above 3.8% as rising risk appetite shifted monies from bonds to stocks. Higher yields are a headwind for gold because they increase the opportunity cost for holding it instead of bonds as a safe-haven asset.

The dollar slipped 0.3% against major rivals on the prospect of a pause in rate hikes this month.

The other precious metals were mostly lower, with silver and platinum declining 1% and 1.4%, respectively, while palladium picked up 1.3%.

At the Comex close: August gold slipped $11.10 to $1,958.60; July silver dropped 24 cents to $23.82; July platinum lost $13.40 to $981.90; and September palladium added $17.50, to $1,358.60 an ounce.