Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained another 0.7% to close near $1,782 as a rising PCE index lifted demand for inflation hedges, while pullbacks in the dollar and bonds yields supported alternative stores of vale. The metal rose 3.2% this week but still slipped 1.4% in July.

The Fed’s preferred inflation gauge, the so-called PCE index, jumped 1% in June to push the 12-month rate up to 6.8% from 6.3% in May. Much of the increase came from higher fuel prices. The core PCE, omitting food and energy, rose by 0.6% to lift the 12-month rate to 6.8%, up from 6.3% in May.

The sharply higher inflation print is a harsh reminder that prices continue to climb. The Fed must tread carefully as it tries to control inflation without tipping the economy into recession. GDP contracted by nearly 1% in Q2, the government reported yesterday, after shrinking by 1.6% in Q1.

The central bank acknowledged the risks to growth this week after raising interest rates by 75 basis points for the second straight month. Fed Chair Powell, in what was considered a dovish signal, suggested that the Fed would be sensitive to economic data when considering another move in September.

Gold suffered in July and the dollar surged to new 20-year highs as traders speculated that the Fed would deliver a 1% this week. When that did not happen, and with Powell sounding relative less hawkish, the dollar retreated and gold rallied.

Both trends continued today, with the dollar sliding another 0.3% against major rivals and gold continued to climb. A weaker dollar supports gold and other commodities by making them less expensive in other currencies.

Benchmark 10-year Treasury yields pulled back under 2.65% on the rate view and intensifying worries about the economy. Falling yields lift gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

US Consumers continue to be pessimistic about inflation and prospects for the economy. The University of Michigan survey hovered slightly above its all-time low in July.

The metal’s rise was capped by another solid day on Wall Street. Despite the PCE and consumer sentiment data, all three major indexes rallied behind the softer tone from Powell and solid earnings by tech giants. The Dow and S&P 500 rose 0.9% and 1.4%, respectively, while the tech-heavy Nasdaq climbed 1.8%.

The other precious metals were also higher. Silver rose 1.7%, notching a weekly win of 8.5% but a monthly loss of 0.8%. Platinum added 1.5% but slipped 0.6% this month; palladium rallied 2.4% today and 11% in July.

At the Comex close: December gold rose $12.60 to $1,781.80; September silver gained 33 cents to $20.20; October platinum picked up $13 to $889.80; and September palladium climbed 49.50 to $2,129.70 an ounce.