Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold fell 1.9% to close under $1,678 as an increasingly hawkish outlook for interest rates further lifted yields and the dollar, undermining alternative stores of value. It was the metal's lowest finish since April 2020.

This week's higher-than-forecast reports on consumer inflation and core wholesale inflation continued to reverberate through the markets, fueling expectations that the Fed will enact another huge rate hike when it meets next week.

Fed fund futures traders have fully priced-in a third consecutive increase of 75 basis points. A hike of 1%, which would be the biggest since the 1980s, has a one-in-three chance.

After pausing for slight gains yesterday, all three major US stock indexes resumed their downward slide, with the Dow dropping 0.6% while the S&P 500 and Nasdaq, both containing more rate-sensitive tech shares, lost 1.1% and 1.4%, respectively.

Risk-appetite faltered despite some upbeat US economic data. Retail sales rose 0.3% in August, defying forecasts that it would remain unchanged from July. And first-time jobless claims fell for the fifth straight week to a three-month low.

However, the Empire State and Philly Fed manufacturing indexes both slipped into contraction, suggesting that aggressive monetary tightening by the Fed is slowing the economy. And the World Bank warned that the global economy is increasingly likely to fall into recession next year because of concerted rate increases by the major central banks.

The bond selloff also continued, lifting yields as investors demand higher returns for locking up cash in an environment of rising interest rates and strong inflation. Higher yields pressure gold by increasing the opportunity cost for holding it instead of bonds.

The dollar inched up slightly to hold near the highest levels in 20- years on the prospect of higher rates from the Fed. A strong dollar weighs on gold and other commodities by making them pricier overseas, reducing overall demand.

The other precious metals were also lower. Silver lost 1.5%, platinum dipped 0.2%, and palladium dropped 1.2%.

At the Comex close: December gold lost $31.80 to $1,677.30; December silver shed 30 cents to $19.27; October platinum slipped $1.70 to $903.70; and December palladium dropped $26.60 to $2,146.10 an ounce.