Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold rallied 1.1% to close near $2,002 as yields and the dollar slid ahead of the release of the minutes from the Fed’s October meeting. The metal then held those gains despite the minutes showing a slightly more cautious Fed than expected.

Fed officials were cautiously optimistic at their last meeting when they voted unanimously to keep interest rates unchanged. But the minutes from that meeting, released today, also revealed that “most participants continued to see upside risks to inflation,” and want to keep rates high “until inflation is clearly moving down.”

The Fed is forecasting one more hike in coming months, something the markets have utterly discounted. Fed fund futures trading see no chance of rate hikes in December and January, followed by a 30% chance of a rate cut by March, growing to 60% by the May meeting.

Prior to the minutes, benchmark 10-year Treasury yields pulled back under 4.4% on the dovish rate view. Following the release, yields ticked back above 4.4% but remained in the red for the day. Lower yields support gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The dollar fell for a third session ahead of the minutes under pressure from a sharply higher yuan and yen. The buck then inched slightly into the black after the minutes but remained mired near a 30-month low. Dollar weakness boosts gold and other commodities by making them cheaper overseas.

Surprisingly weak housing data also supported the metal. The National Association of Realtors reported US exist-home sales plunged 4.1% in October, marking five straight months of declines to the lowest level in 13 years. Sales were hurt by mortgage rates, which hit a 20-year high in October, and low inventory.

Strong physical buying in other parts of the world continues to undergird the gold price, with gold imports to India jumping to a 31-month high in October.

The other precious metals were also higher, with silver adding 1.1% while platinum picked up 2% and palladium rising 0.3%.

At the Comex close: December gold gained $21.30 to $2,001.60; December silver rose 26 cents to $23.87; January platinum picked up $18.50 to $945.90; and December palladium advanced $3.20 to $1,095.50 an ounce.