Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold edged up less than 0.1% to close above $1,944 as worries about the debt ceiling slightly outweighed upbeat US economic data and stubborn inflation, which increased the odds of another rate hike from the Fed. The metal fell 1.9% for the week for its third straight weekly decline.

Debt-ceiling negotiations between the White House and Congress will remain at an impasse for long holiday weekend, with "major issues" still in the way of an agreement, according to a Republican spokesperson.

While the markets expect a deal to be reached before a catastrophic default in early June, damage to the economy may be unavoidable. Fitch rating service warned of a potential downgrade in US credit because of the brinksmanship so far.

Gold rallied as high as $1,957 in intraday trading on safe-haven demand due to debt-ceiling uncertainty before robust US data and rising inflation caused its retracement to a small closing gain.

According to the PCE index, the cost of goods and services rose 0.4% in April, lifting the yearly inflation rate to 4.4% from 4.2% in March. The annual core rate, less food and energy, rose to 4.7% from 4.6% the month before. The PCE is the Fed's preferred gauge.

In addition, consumer spending jumped 0.8% in April, doubling forecasts, for the biggest increase in three months. The robust print shows signals solid momentum in the economy despite higher interest rates and tighter lending. Consumer spending accounts for roughly 70% of GDP.

The combination of sticky inflation and strong data has increased the chances that the Fed will continue to raise interest rates. Fed fund futures trading now sees a 71% likelihood of a quarter-point hike in June, up from 50% yesterday.

The dollar and yields were essentially flat for the day but higher for the week.

The other precious metals were higher for the day and mixed for the week. Silver rose 2% for the session but fell 2.9% for the week. Platinum added 0.2% today but lost 4.4% this week. Palladium picked up 0.6% for a weekly rise of 6.4%.

At the Comex close: June gold added 60 cents, to $1,944.30; July silver rose 45 cents to $23.36; July platinum picked up $1.80 to $1,028.10; and September palladium climbed $7.90 to $1,426.10 an ounce.