Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinNew York spot gold added less than 0.1% to close above $2,390 as abating recession worries lifted yields and the dollar, undercutting alternative stores of value. Silver dropped 1% to finish at $26.83 an ounce.

Data this week showing unexpected resilience in the US services sector has helped to quell anxiety that the Fed has fallen behind again and the economy could slide into recession. Service-oriented businesses like banks, hospitals, retailers and restaurants jumped from contraction in June to expansion in July, according to the ISM. Most Americans are employed in this sector.

Benchmark 10-year Treasury yields bounced back up near 4% after tumbling to a multi-month low under 3.7% on Monday as investors believe the early near-panic was overdone. Lower yields help gold by reducing the opportunity cost for holding it instead of bonds.

But yields remain constrained and gold remains supported by the growing expectation that the Fed will cut interest rates, perhaps aggressively, starting in September, if not before. Last Fridays weak jobs report has Fed fund futures pricing in more than a full 1% in total rate cuts by December, with nearly 70% certainty of a half-point reduction in September.

Capping golds rise, the dollar picked up 0.2% as the yen weakened after BOJ Deputy Governor Shinichi Uchida said the central bank will not cut interest rates for now. A rising dollar makes gold and other commodities pricier in other currencies.

Platinum and palladium rose 1% and 3%, respectively.

At the New York spot close: gold gained $1.40 to $2,390.50; silver slid 27 ents to $26.83; platinum picked up $9.50 to $929.70; and palladium climbed $25.90 to $886.30 an ounce.