Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.5% to close at a two-week high near $1,263 as a rally in the UK pound pressured the dollar and rising consumer prices in the U.S. and England boosted demand for the metal as an inflation hedge.

Britain's currency jumped nearly 1% against the dollar after consumer inflation rose 1% in the UK to a two-year high in September. The rally helped to push the buck 0.2% lower against a basket of other currencies, supporting gold and other commodities denominated in it for international trade by making them less expensive overseas.

U.S. consumer prices also rose, with the CPI adding 0.3% behind rising gasoline and housing costs. Year-over-year through September, inflation has risen 1.5%, the largest 12-month gain since 2014. So called core CPI, excluding food and energy, rose just 0.1%. Real earnings decreased by 0.1% in August, however, according to a separate report from the BLS.

With the Fed already nearly certain to raise interest rates in December, the higher CPI did nothing to boost the likelihood of higher interest rates. In fact, the odds actually ticked down from 70% to 69%, according to CME FedWatch. It also did nothing to boost the dollar, which has tended to rally on any data�especially rising inflation�that could strengthen the Fed's case for raising rates.

So, for the first time in quite a while, gold was free to rise on one of its key fundamentals, as a hedge against inflation, without being quashed by the countervailing pressure of the dollar also rising from higher inflation.

The other precious metals also finished higher, with silver rising 0.9% while platinum and palladium picked up 1.2% and 0.3%, respectively.

At the Comex close: December gold gained $6.30 to $1,262.90; December silver jumped nearly 17 cents to $17.64; January platinum rose $10.30 to $946.50; and December palladium picked up $1.60 to $639.40 an ounce.