Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold held steady, inching up 30 cents to close near $1,979, as expectations for deeper monetary easing from the Fed offset a rally in equities driven by upbeat economic data. It was the metal's highest finish in two weeks.

Manufacturing gathered strength for the fourth straight month, with the ISM index rising to the highest level in 21 months as factories rebound. New orders jumped to the highest level since 2004. But companies have not rehired many of the worker laid off during the COVID-19 lockdowns, and many of those who have been rehired face reduced hours.

New international data also pointed toward recovery. The Eurozone manufacturing PMI signaled improving conditions in August and China's Caixin PMI showed private manufacturing expanded further in July.

Wall Street welcomed the upbeat data, with the Dow and S&P 500 both adding 0.6% while the tech-heavy Nasdaq rose 1.2%. The dollar also perked up, adding 0.2% against major rivals. A rising dollar typically created headwinds for gold by making it more expensive overseas.

Fed Governor Lael Brainerd today said the central bank needs to "pivot" aggressively to provide more monetary stimulus to the US economy in coming months. With interest rates already near zero, additional easing is likely to mean even deeper quantitative easing, the Fed's program of flooding the system with cash by purchasing Treasury and corporate bonds.

The Fed's new framework of inflation averaging, announced last week, will allow inflation to run well above the 2% target for extended periods before rates are raised again. As a result, real yields–that is, the yield on US Treasurys minus inflation–plunged yesterday to an all-time low of negative 1.11%.

Negative real yields and quantitative easing are both bullish for gold. Negative yields eliminate the opportunity cost for holding the metal, while QE undermines the value of the dollar, making gold more attractive as a hedge against loss of purchasing power.

The other precious metals were also higher, with silver adding 0.2% while platinum and palladium gained 1.6%, and 1.4%, respectively.

At the Comex close: December gold picked up 30 cents to $1,978.90; December silver rose a nickel to $28.65; October platinum rose $14.80 to $952.70; and December palladium climbed $31.80 to $2,311.10 an ounce.