Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 2.3% to close at a four-week low under $1,832 as yields and the dollar surged on expectations of sharply higher interest rates, pressuring alternative assets.

Friday’s CPI print for May showed inflation rising a new 40-year high of 8.6% year-over-year, dispelling the idea that inflation has peaked and forcing investors to brace for even tighter monetary policy from the Fed. Wall Street plunged closer toward bear territory as traders digested the ramifications of the new inflation data.

The Dow has now shed more than 5% since Friday morning while the S&P 500 has dropped more than 6%. The tech heavy Nasdaq, more sensitive to interest rates because its stock valuations rely heavily on future cash flows, has fallen 7.5% in two days.

Benchmark 10-year Treasury yields rocketed above 3.38% as bond traders dumped lower yielding government debt, demanding higher returns for tying up cash as inflation continues to rise. US 2-year Treasury yields climbed above 10-year yields, briefly inverting the yield curve.

Higher yields created headwinds for gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The dollar rallied to a 20-year high against major rivals on speculation that the Fed may raise interest rate by 75 basis points when it meets this week. A stronger dollar weighs on gold by making it more expensive in other currencies, limiting overseas demand.

The other precious metals were also lower, with silver dropping 3.1% while platinum and palladium lost 4% and 6.7%, respectively.

At the Comex close: August gold fell $43.70 to $1,831.80; July silver dropped 68 cents to $21.26; July platinum shed $38.70 to $932.30; and September palladium tumbled $128.60 to $1,778.40 an ounce.