Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.2% to close above $1,742 despite rising bond yields after surprisingly strong US jobs data stoked inflation concerns, lifting alternative stores of value. Despite two straight winning sessions, metal still finished the week 3.3% lower on an increasingly aggressive interest rate outlook from the Fed.

The economy added 372,000 jobs in June, far more than forecast, signaling momentum in the labor market even as signs of recession appear elsewhere in the economy. The unemployment rate remained unchanged at 3.6%, just above the pre-pandemic low.

The unexpectedly strong jobs data reinforces the likelihood that the Fed will raise interest rates by another 75 basis points at its July meeting in two weeks, and perhaps at its September meeting, too. Fed fund futures traders are even pricing in a 7% chance of a full 1% hike this month, up from zero yesterday.

The Fed’s minutes from their June meeting, released earlier this week, underscore the central bank’s resolve to prevent inflation from becoming entrench by raising interest rates, even at the expense of economic growth.

Higher rates tend to weigh on gold and other commodities by lifting the dollar, which makes them more expensive in other currencies and thereby reduces overseas demand.

Benchmark 10-year Treasury yields climbed back above 3% on the hawkish rate view, limiting gold’s gains by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

But 2-year yields pushed even higher to more than 3.1%, inverting the yield curve, as investors bet that short-term inflation will remain high while longer-term prospects for the economic growth are bleak.

Gold is often sought as a store of value during inflationary times and as a safe-haven asset during periods of economic weakness.

The metal was also supported by a dip in the dollar, which fell sharply against the yen after former Prime Minster Shinzo Abe was assassinated today while campaigning for a parliamentary election.

The other precious metals were higher for the day and mixed for the week. Silver rose 0.3$ but ended the week down 2.2%. Platinum rose 2% to pull out a weekly gain of 1.3%. Palladium jumped 8.2% today and 11% this week.

At the Comex close: August gold rose $2.60 to $1,742.30; September silver added a nickel, to $19.24; October platinum picked up $17 to $882.80; and September palladium leapt $163.20 to $2,156.60 per ounce.