Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold edged up nearly 0.1% to close above $1,837 in choppy trade after a stronger-than-expected CPI print sharpened appetite for inflation hedges. It was the metal's fifth straight winning sessions, its longest streak since November.

The Consumer Price Index rose 0.6% in January, more than forecast, to push the 12-month inflation rate to 7.5%, the highest in 40 years. The so-called core inflation rate, stripping out volatile food and energy prices, also rose 0.6% to push the 12-month rate up to 6%, which is also the highest in 40 years.

The blowout inflation reading prompted traders to price-in a 97% likelihood of a half-point interest rate hike by the Fed at its March meeting. It would be the biggest jump in rates in 20 years.

Benchmark 10-year Treasury yields pushed above 2% for the first time in 30 months on the growing certainty of significantly tighter monetary policies from the Fed. Higher yields typically create a headwind for gold by increasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The metal initially fell on the CPI print as investors responded to higher bond yields. But it quickly rebounded on demand for hedges against inflation and the increasing likelihood that the central bank, already behind the curve, may commit additional policy errors that either let inflation become entrenched or snuff out the economic recovery.

Sharply lower equities also supported haven flows into gold, with the Dow and S&P 500 dropping 1.5% and 1.8%, respectively, while the Nasdaq lost 2.1%

The other precious metals were mostly higher, with silver and platinum adding 0.8% and 0.5%, respectively, while palladium slid 0.9%.

At the Comex close: April gold added 80 cents, to $1,837.40; March silver gained 18 cents to $23.52; April platinum rose $5.10 to $1,042.50; and March palladium fell $19.80 to $2,265.30 an ounce.