Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.2% to close above $2,040 despite slightly higher yields as the dollar slipped and oil rose sharply, boosting demand for alternative store of value.

Another pair of Fed officials downplayed the prospect of lower interest rates today, suggesting that the markets have gotten ahead of themselves in reaction to last week’s dovish forward guidance by the central bank following its two-day policy meeting.

The Chicago Fed’s Austan Goolsbee said today that he is “confused” by the market reaction, which saw the gold and the equities spike higher while Treasury yields and the dollar tumbled.

Goolsby added that the Fed’s updated dot-plot forecast, which shows more than half the FOMC projecting three rate cuts next year, does not mean the central bank is pre-committing to a policy pivot.

Loretta Mester of the Cleveland Fed echoed the sentiment that the markets “got a little bit ahead” of the Fed on when to expect rate cuts. Fed fund futures traders are pricing in a 63% probability of a quarter-point reduction in March, up from 42% before the Fed’s policy statement last week.

Mester and Goolsby joined New York Fed's John Williams and Atlanta Fed's Raphael Bostic, who made similar statements late last week trying to douse market enthusiasm over rate cuts.

Despite the hawkish jawboning, the dollar slipped against major rivals as ECB President Christine Lagarde and BoE Governor Andrew Bailey have rejected calls to lower interest rates. A weaker dollar lifts gold by making it less expensive in other currencies, lifting overseas demand.

Gold was also held by rising oil prices. US benchmark WTI crude jumped 1.5% after the Yemeni Houthi, an Iran-backed militant group, attacked a Norwegian-owned ship in the Red Sea, raising concerns about disruption in trade. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

An uptick in benchmark 10-year Treasury yields limited gold’s rise by increasing the opportunity cost for holding it instead of bonds for safety. But yields remained under 4% near five-month lows.

The other precious metals all declined by 0.2%.

At the Comex close: February gold added $4.80, to $2,040.50; March silver slipped a nickel to $24.11; January platinum dipped $1.40 to $954.30; and March palladium shed $3 to $$1,199.40 an ounce.