Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 1.8% to close above $1,943 after the Fed raised interest rates by less than feared, pressuring the dollar and lifting alternative stores of value.

Expressing concerns about the ongoing pandemic and the war in Ukraine, the Federal Reserve hiked rates by a quarter-point yesterday rather than the half-point many investors were expecting. Hoping to reduce inflation without snuffing growth via an excessive tightening, the central bankers forecast a series of additional increases over the next 18-months to bring rates above 1.75%.

The dollar fell 0.6% against major rivals as Forex investors retreated from positions staked out in anticipation of a more hawkish Fed meeting. A falling dollar lifts gold by making it cheaper overseas.

Benchmark 10-year Treasury yields pushed up to 2.2%, in part of expectations that the Fed may not be able to contain inflation, currently running at a 40-year high, in the near term.

While higher yields are often a headwind for gold because they increase the opportunity cost for holding it instead of bonds, inflation-adjusted real yields are still deeply negative, making gold attractive as a hedge against loss of purchasing power.

The Ukraine war also triggered safe-haven demand for the metal as peace talks have been ineffectual and Russia continues to bomb civilian targets.

Equity markets extended yesterday's rise, with all three major US indexes adding 0.8%, on relief that the first rate hike since 2018 was not more aggressive. Some upbeat data added to risk appetite. Unemployment claims fell by 15,000 last week while housing starts rose 6.8% and US industrial production picked up 0.5% in February.

Sharply higher oil prices also fueled gold's run up, with WTI crude recouping 9% on war-related supply concerns after dropping 22% over the previous three sessions. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The other precious metals were also higher, with silver rising 3.7% while platinum picked up 2.3% and palladium climbed 5.3%.

At the Comex close: April gold gained $34 to $1,943.20; May silver jumped 91 cents to $25.62; April platinum picked up $23.30 to $1,031.30; and June palladium climbed $124.70 to $2,492 an ounce.