Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.8% to close above $2,052 as economic uncertainty and the prospective end of the Fed's aggressive rate-hike cycle boosted alternative assets. The metal rose above $2,085 in intraday trading, close to its all-time intraday high of $2,085.40, before slipping back on profit taking.

The Fed raised interest rates by a quarter-point yesterday, pushing the benchmark rate to a 23-year high between 5% and 5.25%. But more important to the markets, its post-meeting policy statement signaled — for the first time in more than a year — that additional rate increases are no longer planned.

Fed Chair Jerome Powell reinforced the long-awaited pivot in his press conference, telling reporters that the interest rates are restrictive enough to bring inflation back down to the Fed's 2% target.

Fed funds futures traders are now pricing-in a 94% probability of no rate hike in June, according to CME FedWatch. What's more, the chance of rate cuts by September has risen to 93% as the Fed grapples with the slowing economy, heightened risks to the banking sector, and fallout from a potentially damaging fight over the US debt ceiling.

Falling interest rates lower bond yields, making gold more attractive by reducing the opportunity costs for holding it instead of bonds for safety. And lower rates also weigh on the dollar, lifting gold by making it cheaper in other currencies.

In further signs of a weakening economy, government data released today showed US productivity fell 2.7% in the first quarter while real GDP, adjusted for inflation, rose just 1.1%. And first-time jobless claims rose by 13,000 to 242,000 last week, reflecting a wave of layoffs in high-tech industries.

After declining sharply yesterday, benchmark 10-year Treasury yields and the dollar were both little changed.

The other precious metals were mixed, with silver rising 1.2% while platinum and palladium dropped 0.3% and 0.6%, respectively.

At the Comex close: June gold gained $15.30 to 2,052.30; July silver added 30 cents, to $25.98; July platinum fell $2.80 to $1,059; and June palladium slid $7.80 to $1,409 an ounce.