Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.2% to close above $1,301 as the dollar fell ahead of the conclusion of the Fed's meeting on interest rates. The metal then briefly dropped below $1,298 after hours when the Fed released a mildly hawkish statement, only to rebound above $1,305 within minutes as traders digested the news.

The FOMC, as fully expected, raised the benchmark federal funds rate by a quarter-point to a range of 1.75% to 2%. In its post-meeting statement, however, the central bank shifted its position slightly to suggest a possible path to four rate hikes this year instead of three. Eight Fed official now project a fourth hike this year while seven continue projecting three, a change in one voter.

Gold slipped immediately on the release of the statement as the dollar rebounded from earlier losses. An additional hike would boost the buck by attracting more foreign exchange investment seeking higher yield.

But as traders digested the news, gold quickly bounced back into gains, rising above $1,305 in electronic trade, while the dollar tipped back into losses. During this tightening cycle, gold has regularly traded lower in anticipation of a rate hike and then spiked higher after its announcement, often to launch a sustained rally.

Sharply higher wholesale inflation also supported gold, which is often used as an inflation hedge. The Producer Price Index jumped 0.5% in May for a yearly rise of 3.1%, the most since 2012, on a steep rise in oil prices. The so-called core rate, which factors out volatile food and energy costs, rose just 0.1% to a yearly rate of 2.5%.

The other precious metals mostly finished higher, with silver and platinum rising 0.6% and 0.1%, respectively, while palladium dropped 0.8%.

At the Comex close: August added $1.90, to $1,301.30; July silver rose 10 cents to $16.99; July platinum picked up $1 to $902.50; and September fell $8.10 to $1,007.20 an ounce.