Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.7% to close at $2,037 on safe-haven inflows ahead of the Fed's decision on interest rates. The metal then surged above $2,043 in electronic trade after the central bankers raised rates but signaled the possible end of this rate-hike cycle.

As widely expected, the Federal Reserve raised interest rates by 25 basis points at the end of its two-day policy meeting, pushing the benchmark rate to between 5% and 5.25%. It marked the tenth consecutive meeting with a rate hike and the quickest pace of tightening in 40 years.

But the Fed's accompanying policy statement contained a notably dovish change in forward guidance. In place of longtime declarations that further rate increases "are anticipated," the Fed now says "additional policy firming may be appropriate" if incoming data warrant.

The dollar fell 0.6% as traders speculated that the Fed is done raising interest rates. Fed fund futures traders are now pricing in a 90% probability of a pause at the June meeting, and a 78% chance of a rate cut by September. A falling dollar lifts gold by making it less expensive in other currencies.

Even before the Fed's dovish lean, instability in the banking sector, the slowing US economy, and a looming debt-ceiling crisis were already spurring investors toward gold and silver. The end of aggressive rate hikes would open the door to another, higher leg in their current bull market.

Gold's gains came despite stronger-than-expected data on private-sector jobs. ADP reported 296,000 additions to private payrolls in April, the most in nine months. But the more authoritative US nonfarm payrolls report, due tomorrow, is forecast to be far weaker at just 180,000, according to a Wall Street Journal poll.

The other precious metals were mixed, with silver rising 0.2% while platinum and palladium fell 1.5% and 0.8%, respectively.

At the Comex close: June gold gained $13.70 to $2,037; July silver added 6 cents, to $25.68; July platinum dropped $16.50 to $1,061.80; and June palladium shed $4.20 to $1,416.80 an ounce.