Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinExtending yesterday's 0.5% rise, gold jumped another 0.8% to close above $1,292 as soft US data pressured the dollar, boosting demand for alternative stores of value. The metal then rallied higher in electronic trade, pushing above $1,298 after dovish minutes from the last Fed meeting clouded the outlook for rate hikes.

Orders for durable goods plunged 1.2% in October, only the second monthly drop this year, as bookings fell off for aircraft and military hardware. Perhaps more worrisome for the health of the economy, business investment dropped by the most this year as companies played wait-and-see on tax cuts.

The dollar lost 0.3% against major rivals, pressured by the soft data and apprehension about the midday release of the Fed minutes. The buck then doubled its losses after hours when the central bank signaled growing apprehension about persistently low inflation. A falling dollar typically supports gold and other commodities denominated in it for global trade by making them les expensive oversees.

While the Federal Reserve held interest rates unchanged this month, an increasing cohort of senior members voiced concern over the inflation outlook, according to the minutes released today, with several saying they needed more data before deciding on another rate hike. The language of the statement was notably less hawkish than before, changing September's prediction of a hike "later this year" to "warranted in the near term," leaving the door open to postponement.

The 12-month inflation rate based on the PCE index, the Fed's preferred metric, has fallen to just 1.6%, well-under the 2% target. Stripping out food and energy, the rate is merely 1.3%. Speaking at NYU yesterday, Janet Yellen called achieving 2% inflation the Fed's biggest challenge.

The other precious metals also gained, with silver climbing 0.9% while platinum and palladium added 0.3% and 0.6%, respectively.

At the Comex close: December gold gained $10.50 to $1,292.20; December silver rose 25 cents to $17.11; January platinum added $2.70, to $940.70; and December palladium picked up $5.45 to $1,001.95.