Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.7% to a three-week low under $1,255 after yesterday's rate hike and hawkish tone from the Fed boosted the dollar, damping demand for alternative stores of value.

The Federal Reserve hiked interest rates by a quarter-point, as expected, at their two-day meeting on monetary policy that ended yesterday. They surprised the markets, however, by stating their intention to hike again this year despite soft growth data and weakening inflation. They will also begin to shrink their $4.5 trillion balance sheet accumulated through quantitative easing during the recession.

Fed Chair Janet Yellen supported her colleagues' hawkish view by saying inflation is coming. The strong labor market will eventually translate into higher wages and prices, with annualized inflation surpassing 2% by 2019, she said following the Fed's meeting.

Meanwhile, the BLS reported today that US import prices fell 0.3% in May, while export prices dropped 0.7%.

The dollar gained 0.5% against major rivals on the Fed's rate view, pressuring gold and other commodities denominated in it for international trade by making them more expensive overseas.

The other precious metals were mostly lower, with silver and platinum losing 2.5% and 3.2%, respectively, while palladium added 0.5%.

At the Comex close: August gold fell $21.30 to $1,254.60; July silver plunged 42 cents to $16.72; July platinum dumped $30.60 to $921.30; and palladium rose $4.15 to $857.95 an ounce.