Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinNew York spot gold fell 1.9% to finish at $2,302.90 as traders closed their monthly books by taking profits from a record rally while preparing for potentially hawkish messaging from the Fed. The gold price still rose 3.9% in April, notching its third consecutive monthly gain. Silver dropped 3.6% today but posted a 6.4% gain for the month.

The Fed began its two-day meeting on monetary policy today with the expectation that interest rates will stay 5.25 to 5.5%. Traders will scour the post-meeting statement and press conference from Fed Chair Jerome Powell for clues on the direction of interest rates.

At the beginning of the year, Powell said inflation was contained and a pivot to lower interest rates was coming. The market, perhaps getting ahead of itself, priced in four to six reductions of 25 basis points in 2024.

But resurgent consumer and wholesale prices have changed the outlook. For the past two months, some Fed officials have been preaching higher rates for longer. Powell is widely expected to make this hawkish stance the new Fed gospel at this week's meeting.

Fed fund futures traders now see a likelihood of 64% that the initial rate cut will come in November, with only a 24% chance of a second one before 2025.

Data released today underscore the Fed's dilemma. US labor costs rose 1.2% in the first quarter, the fastest in 18 months, adding to inflationary pressure in the pipeline.

The Chicago PMI tumbled under 38 in April, the lowest level since November 2022, where readings under 50 indicate contraction. It was the fifth consecutive negative reading for the regional manufacturing index.

And consumer confidence plunged to a 21-month low in April, the Conference Board reported, because of elevated food and gas prices, and worries about geopolitical turmoil.

Benchmark 10-year Treasury yield climbed back to nearly 4.7% after the robust labor-cost data, pressuring gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Tracking higher with yields, the dollar rebounded 0.6% against major rivals, adding to headwinds for gold and other commodities by making them pricier in other currencies.

Despite the shifting interest rate landscape, gold rallied to a series of new all-time highs in April. It remains strongly supported by the same forces, including unprecedented buying by global central banks as they diversify their reserves away from G7 currencies; safe-haven inflows because of geopolitical turmoil; and aggressive physical buying in Asia, especially China, among retail investors.

Platinum slipped 0.7% today but rose 4.4% this month. Palladium fell 2.5% for a monthly decline of 6.7%.

At the New York spot close: gold dropped $44.30 to $2,302.90; silver slid 98 cents to $26.37; platinum slipped $6.25 to $947.85; and palladium shed $24.80 to $952.80 an ounce.