Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold added 0.1% to close above $1,754 as the dollar pulled back and sharply higher inflation in the US and Eurozone boosted demand for inflation hedges. The metal finished the week with a gain of 0.4% for its second straight weekly win.

The Fed's preferred gauge of inflation, the personal consumption expenditure price index (PCE), rose 0.4% in August, pushing the 12-month rate to 4.3%, the highest level since 1991. It was the sixth straight month of big increases.

Until recently, the Fed has dismissed the inflationary trend as temporary, saying it will drift back to the target 2% as markets normalize after the pandemic closures. But this week Chair Jerome Powell acknowledged that higher prices are likely to be persistent, perhaps through the next summer, as supply-chain bottlenecks worsen.

Eurozone inflation surged to a 13-year high last month, also on supply problems, and is likely to rise further, complicating monetary policy for the ECB. While modest tightening is likely in coming months, ECB policymakers are expected to keep interest rates extremely low to prevent the deflationary pressures that have plagued the Eurozone for the past decade.

US consumer spending increased 0.8% in August, according to Commerce Department data. But inflation is beginning to take its toll on Americans' willingness to spend. Real (inflation-adjusted) spending was just 0.4% last month and July's print was revised down to negative 0.5%, rather than the 0.3% gain initially estimated.

With consumer spending comprising roughly two-thirds of the economy, economists are concerned that higher prices are creating headwinds for growth. The Atlanta Fed decreased its third-quarter GDP estimate to 2.3% from 3.2%.

Meanwhile, the ISM index of US manufacturing rose to 61.1% in September, the highest reading since May.

Benchmark 10-year Treasury yields fell back under 1.47% as investors returned to bonds as protection from the consuming pandemic and the prospect of slowing global growth. Lower yields support gold by decreasing the opportunity cost for holding it instead of bonds.

The dollar pulled back for a second day, slipping 0.2% against major rivals and lifting gold and other commodities by making them cheaper in other currencies. The buck still had its best week since August, rising 0.8% on expectations that the Fed will taper easing this year and raise interest rates by the end of 2022.

The other precious metals were higher for the day and mixed for the week. Silver jumped 2.2% for a weekly gain of 0.5%. Platinum added 1.2% but still slid 0.6% this week. Palladium edged up 0.2% for the day but lost 2% for the week.

At the Comex close: December gold added $1.40, to $1,758.40; December silver climbed 49 cents to $22.54; January platinum rose $11.20 to $973.60; and December palladium picked up $3.90 to $1,903.70 an ounce.