Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained another 0.7% to close at $1,859 as weak US data and falling Eurozone inflation weighed on yields and the dollar, lifting alternative assets. It was the metal's fourth straight winning session and highest finish since early June.

The ISM index showed US manufacturing fell further into contraction in December, dropping to the lowest level since May 2020 during the depth of pandemic closures. New orders, production, and employment all fell. The manufacturing sector is seen as a leading indicator for the broader economy, suggesting additional overall weakness ahead.

In another dour sign for the beleaguered housing market, mortgage applications fell more than 13% at the end of December, plunging to the lowest level in 27 years. Home sales and prices have weakened this year in response to rising interest rates and increasing economic uncertainty.

Benchmark 10-year Treasury yields fell back under 3.7% as investors, wary of recession, shifted toward the perceived safety of government bonds. Falling yields support gold by decreasing the opportunity cost for holding instead of bonds as a safe-haven asset.

Inflation in France fell unexpectedly to 5.9% in December, driven by lower energy prices. Following similar cooling in Germany, Spain, and Belgium, the lower price pressure increased hopes that the ECB may be slower to raise interest rates in coming months.

Tracking lower with yields, the dollar slipped 0.2% against major rivals as the French inflation data help the euro. A weaker dollar buoys gold and other commodities by making them cheaper in other currencies.

For the second session, gold gained despite dramatically lower oil prices. WTI crude has now plunged 8% in two days on growing concerns that the slowing global economy and accelerating Covid pandemic in China will weigh heavily on demand in 2023. While gold typically trades in sympathy with oil as a hedge against energy-related inflation, safe-haven demand is winning out.

Gold held its gains after the release of the minutes from the Fed's December meeting, which showed all members agreed on the need for slower interest rate hikes in coming months.

The other precious metals were mixed, with silver and platinum slipping 1.1% and 0.1%, respectively, while palladium added 6.1%.

At the Comex close: February gold gained $12.90 to $1,859; March silver dropped 27 cents to $23.96; April platinum dipped a dollar to $1,092.30; and March palladium rose $103.80 to $1,796.70 an ounce.